Business imperative?

Changing workforce creates more demand for parental leave

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Christine Noonan at The Motley Fool, which allows
employees to take 16 weeks of paid parental leave.
Photo by Mark Rhodes

Swaziland, Lesotho, Papua New Guinea and the United States are literally and figuratively worlds apart, yet the four countries share a startling distinction.  According to a Human Rights Watch report, out of all the world’s nations, they alone offer working women no legal right to paid maternity leave.

Contrast that lack of support with Croatia, population 4.2 million, which has the world’s most generous benefit for working mothers — 406 fully paid days off. Or with Iceland,  population 332,000, where each parent gets five months off at 80 percent pay and a further two months off  for whichever parent chooses to take it, for a total of a year.

In the U.S., the only federal law concerning parental leave is the 1993 Family and Medical Leave Act. It requires that companies with more than 50 employees give new parents — including same-sex couples — and workers with personal or family medical issues, up to 12 weeks of unpaid leave. This act allows for so many exemptions, however, that it covers just 59 percent of U.S. workers.

What’s more, the Department of Labor says 64 percent of the people who are eligible for the unpaid leave but don’t take it are women, likely because they can’t afford to. This situation is unlikely to be changed by law anytime soon, either. A proposal introduced in Congress last year to give federal employees six weeks of paid parental leave went nowhere.

States are free to enact their own laws regarding paid parental leave, of course, but few have done so. In Virginia, no such law exists, and the Washington, D.C.-based National Partnership for Women and Families (NPWF) could find no bill concerning this subject currently under consideration in Richmond.

The upshot of this lack of interest on the part of state and federal government is that that just 12 percent of working Americans have access to paid parental or family leave, according to the Department of Labor Statistics. Nevertheless, the movement toward making paid leave an employee benefit is picking up in Virginia and elsewhere, with the impetus for change coming from the marketplace.

“Paid leave has moved from being a social issue to being a business imperative,” says Pam Jeffords, a partner based in Denver at Mercer, a global consulting firm with a specialty in employee benefits. In particular, Jeffords says, she is witnessing “a new emphasis on maternity’s role in female success.”

Hurting the workforce?
According to the NPWF, the more than 2 million working women in Virginia represent 47 percent of the state’s overall workforce. Yet a 2014 New York Times/CBS News/Kaiser Foundation poll showed that, on average, more than 40 percent of working women nationally will quit their jobs at some point, mostly because of family obligations, such as caring for a newborn or an ailing parent. That hurts not just their careers, but their employers’ businesses.

In a written statement to a Senate subcommittee hearing on children and families, Vicki Shabo, NPWF’s vice president, cited a survey of 31 companies, along with academic case studies, which found that the median cost for employee turnover equaled, on average, 21 percent of a worker’s annual wages because of issues including separation expenses, higher unemployment insurance, temporary staffing and training. On the other hand, a 2011 study by California’s Center for Economic and Policy Research found that 91 percent of businesses it surveyed reported that paid parental leave either boosted profits or had no effect on the bottom line.

“Parental leave is getting studied a lot,” says Bill Howard, a principal in health and benefits at Mercer’s Richmond office. “Employers want to understand the cost, and everyone wants a benchmark.”

That benchmark now is being set by two sectors of the economy in particular — technology and financial services.

Tech firms in the lead
“Tech companies have been first out of the gate,” says Jeffords, and the obvious reason for that is the rise of the millennials.  

This demographic group, according to the Bureau of Labor Statistics, now makes up 35 percent of the nation’s workforce, and its presence in the tech industry is disproportionally much larger.  By 2025, millennials are expected to constitute 75 percent of the overall labor force.

Paid parental leave is an especially important employee benefit to these young workers because many are starting families or planning to do so soon. Millennials also expect employers to allow them flexibility in how they balance their work and personal lives.

“As more millennials move up through the chain, companies need a much more results-oriented environment,” says Julie Simmons, managing director of Human Capital Strategic Consulting in Fairfax.

Uber tech companies such as Google and Netflix are setting a high bar on leave policies. Google, for instance, gives birth mothers 18 weeks of paid leave and other caregivers 12 weeks. Netflix guarantees new parents unlimited time off for a year.

Leave policies among Virginia’s tech sector are more modest. The Northern Virginia Technology Council, for example, instituted a two-week, fully paid leave policy a few years ago, which its 21 employees can access for parental leave or to take care of family issues. “Morale-wise, it’s been very popular,” says Christine Kallivokas, the council’s chief operating officer.

Policies at other Virginia tech companies seem to be a rather closely guarded secret, but senior benefits consultant Derek Winn of the Business Benefits Group of Fairfax says that his firm works with many tech firms in Northern Virginia and that about 90 percent now have paid parental leave.

No joke at The Motley Fool
The financial services industry is another sector in the vanguard of change. Employees at Bank of America, for example, are eligible for up to 16 weeks of paid maternity, paternity and adoption leave and are given flexible schedules for the 12 months after a child arrives. The company also reimburses up to $8,000 in adoption expenses.

In Virginia, the parental leave policy at the Alexandria-based investment services company The Motley Fool is hard to top. The Fool, as it calls itself, allows its 330 employees to take 16 weeks of paid parental leave and as much as 12 weeks of paid family medical leave, says Christine Noonan, the head of human resources.

“We have fun and work at the same time,” Noonan says. “We don’t micromanage. We treat people like adults.”  The Fool recently won a Game Changer Award from the Virginia Center for Health Innovation for its employee benefits program.

Farther south, in Henrico County, another white-collar business, Elephant Insurance, recently adopted a new parental leave policy for its 600 employees. It now pays new mothers 40 percent of their salary for the first six weeks of leave (eight weeks if they have a cesarean birth), says Louisa Scadden, head of the company’s people services. Short-term disability insurance covers the other 60 percent for those employees who elect to carry the insurance.

For employees who have been with Elephant for more than a year, paid leave is extended to 12 weeks, with the company picking up the whole tab after disability insurance runs out. The primary-care parents additionally receive an extra week of leave during their first year back to tend to family matters and are paid a bonus of two weeks’ salary after six months. Their spouses or partners receive two weeks off at full pay, as well.

“We don’t anticipate a huge change to the bottom line,” Scadden says of the new policy. “If anything, we expect we’ll save money.”

That belief is becoming more common in the private sector, but any law requiring paid parental leave is unlikely anytime soon.

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