Can SMBs Afford Paid Parental Leave?

The Family and Medical Leave Act of 1993 (FMLA) requires employers with 50 or more employees to provide 12 workweeks of unpaid leave to their employees during any 12-month period. According to the U.S. Bureau of Labor Statistics, only 23 percent of private industry workers had access to paid family leave in 2021.  

Although the act does not mandate paid leave, large corporations like Amazon, Hilton, Google, and Twitter offer paid leave programs as an employee benefit. Companies like Zoom and Dropbox offer employees 24 weeks of paid parental leave. Lululemon, a retail company, has a benefits motto that states, “when life works, work works.” Lululemon’s culture surrounding work-life balance is reflected in their six-month paid parental leave policy. 

As a broker and trusted advisor, your job is not only to gain employer clients, but also to help employers make decisions that will positively impact their organizations. A majority of millennials would agree that paid parental leave plays a massive role in their job satisfaction and willingness to accept a job offer. However, if a business’ funds are more limited than Amazon or Lululemon’s, it may not be as easy to offer paid leave programs. 

Can SMBs Afford Paid Parental Leave? 

The following items can help employers decide whether or not they can afford a generous leave policy:

1. Conduct a cost-benefit analysis

The National Partnership for Women and Families found that “implementing paid leave led manufacturing firms to see a $2.57 return for every $1.00 invested.” Although implementing paid leave is very expensive, it can also be expensive to NOT implement one. 

Consider asking your employer clients the following questions: 

• Roughly how much money are you losing by not offering a paid parental leave program? 
• How much money would it cost you to offer a paid parental leave program? 
• Will offering a paid leave program support your organization’s long term success? 
• How would a paid parental leave program impact your recruitment and retention initiatives? 

Your cost-benefit analysis should include both quantitative and qualitative data. Joan Michelson writes in The Harvard Business Review that “It’s important to count the boost to productivity, engagement, morale, and firm reputation that can come with a paid leave policy, too.” HR should include employees in their cost-benefit analysis. Talk to them, make them feel heard, and act on their feedback. 

2. Calculate benefits participation rate

Tracking the benefits that employees use and don’t use can help ensure that employees’ needs are met and money is spent wisely. If there are unused benefits, you can consider reallocating that cost to support a paid leave program. Benefits participation rate is calculated using the following equation: 

3. Look forward to the future of your business

Even if the need for a paid leave program doesn’t seem necessary for your organization at this very moment, consider how a competitive paid leave policy can impact the organization’s future. 

It’s inevitable that paid leave programs will become more and more integral for employees, especially after COVID. In a Wall Street Journal article, Nicholas Christakis of Yale University states, “The dynamics of a contagious disease made it abundantly clear…[that] paid sick leave…[and] such policies are likely to endure after the virus subsides, either because companies see the wisdom of it, lawmakers enforce it, or workers demand it.” If SMBs don’t hop on the bandwagon, it might become difficult to remain standing in a competitive market. 

4. Consider state insurance programs 

The struggle for SMBs to remain competitive in their industries has not gone unnoticed. Implementing a paid leave program might cost your employer less than you think. 

Some states, like Washington, offer small business grants to help offset the cost that SMBs incur by offering paid leave programs. A small business owner in Washington even shared with the National Partnership For Women and Families that her company’s total premium costs for the state program were less than what it costs the organization to provide a single 12-week leave for an employee. 

According to the Center for American Progress, thirteen states have passed paid family and medical leave laws: 

• California
• Colorado
• Connecticut
• Delaware
• Maine
• Massachusetts
• Maryland
• Minnesota
• New Jersey
• New York
• Oregon
• Rhode Island
• Washington State
• Washington D.C.

State-paid leave laws generally work similarly to dental or medical insurance. Employees, employers, or both pay the paid leave insurance premium via payroll contributions, and the SMB employer does not have to pay out-of-pocket when employees need to use their benefits. 

How Can Brokers Inform Employers About Paid Leave Programs?

As a trusted benefits advisor, your job is to present your clients with options that best suit their needs. HR parties of one or HR leaders at small to mid-sized employers may not be aware that a paid leave policy can be affordable and feasible at their organization. 

By guiding HR through the steps mentioned above, you can help employers enhance their workforce’s work-life balance, which will ultimately increase retention, decrease turnover, and help you preserve your book of business!

Additional Resources: 

• Brokers’ Corner Podcast—watch and subscribe to the Brokers’ Corner podcast, which dives into the topics that affect your agency and industry and identifies strategies so you can protect and grow your book of business 
• BerniePortal Brokers’ Council—a council of benefits brokers from across the country that advises BerniePortal on industry concerns, trends, and the ways technology can best support their agency and employer groups 
• BerniePortal for Brokers—leveraging technology to increase your agency valuation and support your employer groups is easier than ever with BerniePortal’s software solution, built for brokers by brokers