Developing a Parental Leave Policy for Your Business

Along with the use of the Imperial System, the U.S. is one of the only industrialized countries without a national paid leave policy for parents. Although, companies with >50 employees must comply with FMLA by providing up to 12 weeks of unpaid maternity leave. And while few states have a publicly-funded disability program (CA, MA, NJ, RI, or NY), no federal or state law requires companies to pay for parental leave for employees. 

The Department of Labor reports that just 15% of companies with 99 or fewer employees have access to employer-provided paid leave, despite that 77% of employees indicated that paid leave had a bearing on job choice (according to a 2016 Deloitte survey). 

While larger companies have begun to voluntarily expand paid leave policies, offering competitive parental leave benefits is a challenge for small businesses who may not have the financial or labor resources to do so. This is where business owners may have to get creative. 

Here are 5 strategies for building a parental leave policy for your business:

1. Utilize Short-Term Disability 

This may be the most common form of parental leave, since most short-term disability policies specifically address giving birth. The policy usually pays out 50-60% of compensation for the period of the "disability" (i.e. post-birth recovery), but how long that benefit pays out (benefit period) and how quickly it pays out (elimination period) depends on the policy. Generally, the policy pays out for 6-8 weeks starting 7-14 days after the "disability" begins. But again, every policy is different. 

Offering a short-term disability policy at your company can provide some sense of financial comfort to your employees, knowing that they won't have to go completely without pay after giving birth. And the nice thing about these policies is that they can be paid for by the employee! So if finances are tight in your small business, you can have the employee bear the cost of the monthly premiums (which normally aren't terribly expensive). As the owner, you'll just need to seek out a policy from an insurance company that will cover your employees. 

The small time it will take for you to get a policy up and running is well worth the benefit provided to your employees. However, it's worth noting that these policies will only cover the employee who actually birthed the baby, meaning, this benefit will not apply to spouses who didn’t give birth.  

2. Offer paid time off 

Of course, an alternative to relying solely on short-term disability is simply offering paid time off. The benefit here is that it does not require the payment of monthly premiums, and it can be offered to a spouse (unlike short-term disability). However, this is also the most expensive option, as the company not only has to continue paying for the employee who is not working, but will likely have to pay something to cover the work of the absent employee.

Even if you can't afford to pay a full 6-8 weeks in paid time off, you could offer something shorter (say 2 weeks) that could be stacked on top of short-term disability. It's a small financial sacrifice, but could go a long way towards your employees' wellness and it shows your respect for their personal circumstances. 

3. Use flex hours

If paid time off is not in the cards due to company finances, offering flex time to new parents can be a great alternative! This could provide more flexibility in terms of work days or even work hours. For instance, you could allow employees with new children to work 3 days per week for the first 4 weeks, then 4 days per week for the next 4 weeks. This gives some time to the employee to adjust to life with a new child.

Alternatively, you could allow them to work 24-32 hours per week and give them the freedom to choose their own hours for a period of time. For instance, maybe mornings are tough for them so a flexible schedule could allow them to work from 10am - 4pm each day. Or if evenings are difficult, they could work from 6am - Noon. 

 Giving employees the freedom to choose their own hours during a hectic time in their life can significantly improve their quality of life and appreciation for their employer (i.e. You).  A recent survey found that 76% of millennial employees would be willing to take a pay cut for flexible working hours. So even if your pay scale is a bit lower than the competition, flexible work hours (especially for new parents) can make up for that.

4. Allow work from home

On a similar note, flexibility in work location could be included in your company's parental leave policy. Perhaps you can't afford to offer paid time off, but your employee has the capability to work from home. If so, allowing new parents to work from home for a period of time after birth could be a major benefit. For instance, you could allow employees to work from home for the first 8-12 weeks after becoming a new parent, then gradually shift back to the office in the following weeks.

As long as the job can be done from home, offering this kind of flexibility can greatly improve employee wellness. Also, given that most of us have adapted to working from home recently, there isn't a great excuse for why this could not be implemented for new parents (in many business settings).  

5. Give unpaid time off

Finally, if you're not able offer any of the above benefits, you could always offer unpaid time off. While not ideal for the employee, it does give them some time to adjust to their new way of life. Aside from offering no parental leave benefits, this is the next affordable option. You may have to hire part-time work to replace the employee temporarily, however, you would no longer be paying a salary for that employee for that period of time. Although not all people are in a position where they could take time off, it at least provides them an option for caring for their new child, without having to worry about losing their job. 

It goes without saying that these strategies may not work for all businesses, but developing a combination of these 5 to fit your line of business can improve employee wellbeing, satisfaction, retention, and morale, while also enhancing overall company culture. Taking the time to develop and document a parental leave strategy BEFORE you have a need for it will save you and your employees a lot of time and energy down the road. 

It's also one step towards creating an inviting culture that will attract top talent, which will ultimately enhance the value of your small business.