Is Paid Parental Leave Right for Your Company?

Today’s hot employee benefit could sway top talent to choose your company.

By Shonna Waters Mar 28, 2017
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​Maybe you know an employee who welcomed a baby recently and took time off to care for the child. Chances are that person didn’t get paid while he or she was out. Parental leave has been a hot topic in the media lately, but only 18 percent of U.S. organizations offer paid maternity leave and even fewer (12 percent) provide paid paternity leave, according to the Society for Human Resource Management’s 2016 Employee Benefits research report. Seventeen percent of employers have a paid-parental-leave plan for either parent.

Tech companies tend to have the most generous policies for working parents. For example, Netflix is among the mere 2 percent of organizations that offer unlimited paid parental leave. That’s great for workers, but it’s smart business, too. Facing an acute skills shortage, tech businesses are leveraging the benefit to attract and retain top talent.

A competitive labor market may prompt more organizations to adopt robust paid-parental-leave policies in order to attract needed workers. How can you determine if it’s a good investment? Start by answering these questions:

What talent has the highest strategic value in your organization? It’s impossible to give all employees the perks they want, so determine which people are most vital to helping you meet your business objectives and focus your benefits strategy on them. It may not be who you think. For example, maybe your customer service representatives have a bigger impact on achieving your business goals than your engineers.

What do employee groups value most? Find out what matters most to your target populations—top workers and candidates you’re having trouble hiring, for example. Market research can be informative, if you have the resources, but you should still talk to your key people to find out what really drives their decisions to stay or leave. Also consider whether workers value being able to choose from among several perks rather than receiving any one specific benefit. Many organizations are increasing employee choice through programs like cafeteria plans. Real-world flexible benefits include Deloitte’s one-month unpaid sabbatical that can be taken for any reason and Microsoft’s annual $800 “stay fit” stipend to spend on fitness activities and equipment.

What are your competitors offering? You can discern this by combining industry benchmarking data with information from departing employees and candidates who turn down job offers in favor of competitors.

What is your company’s talent strategy and culture? Unless you work for Google, your organization probably doesn’t have the resources to dominate the competition in every benefit category. Determine where you want to lead, where you want to meet the market and where you can afford to fall behind a little. If your strategy depends heavily on recent college graduates who are most concerned about student loans, it may be best to lead on tuition repayment perks and meet the market (or even lag) on paid leave.

What’s the business case, and how much will it cost? Paid parental leave is an expensive proposition. But turnover of key talent may be even more costly. In the end, the investment in paid parental leave may make sense—especially if it encourages talented people to come back to work after the birth of a child. Google experienced a decrease in attrition when it increased its paid maternity leave from 12 to 18 weeks.

For busy HR professionals, it can be tempting to maintain the same benefits year after year or to think employees’ preferences don’t change. Instead, challenge yourself to evaluate the return the organization is getting on benefits. If you’re considering offering paid parental leave, take a broader, tactical look at your rewards strategy to make sure it targets your top talent. Can you afford to lose that bright young person to a competitor that provides paid parental leave? Your parental-leave policy might just convince her to stay on board.

Shonna Waters is vice president of research at SHRM.

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