Need a Parental Leave Policy? Here’s How to Set Up an Amazing One

Kim Porter

Parental leave is a chunk of time an employee can take off upon the birth of a child, the adoption of a child, or in some cases, becoming a foster parent. It’s available to new mothers and fathers or other primary caregivers.

The goal is to ensure that such a sunny life event doesn’t get overshadowed by the looming question mark of “What about work?”

Here’s the thing: The bare minimum for leave doesn’t guarantee that employees get wages or a salary while taking time off. Going 12 weeks without a paycheck may not be possible. According to the Peterson-KFF Health System Tracker, giving birth costs an average of $18,865 with $2,854 in out-of-pocket costs if you have a large group plan for insurance coverage. (It can be significantly more expensive if a serious health condition or complications arise). That’s why many employers retool their leave packages to allow people to continue earning a salary while they’re out.

From IKEA to Netflix to small businesses right around the corner, there are tons of companies that offer paid maternity leave, paid paternity leave, or paid parental leave as a whole, even if they’re not required to. So why do they provide it?

Sure, a parental leave policy can signal that an employer cares about their team’s happiness—but there are strategic reasons behind these offerings, too. According to research, offering paid leave can help companies retain workers and keep them engaged—all of which can boost a company’s bottom line. By creating an inclusive policy, you can help your employees start their families with confidence and keep your company running smoothly.

A quick synopsis of parental leave laws

Today, the US is one of the only developed countries with no paid parental leave law. But, the Family and Medical Leave Act (FMLA), which is administered by the US Department of Labor, tells employers what they can and can’t do about unpaid parental leave.

Specifically, the FMLA requires companies with 50 or more employees (located within 75 miles of an office or worksite) to offer new parents up to 12 weeks of unpaid leave over the course of a 12-month period. This rule applies to all full-time workers, regardless of their gender, so long as they’ve worked 1,250 hours for their employer prior to taking leave.

On top of federal law, certain states have stricter mandates that overrule the “unpaid” rules of the federal government. See the Bipartisan Policy Center’s guide to state paid family leave laws across the US for a summary of what your state requires.

How should I budget for this type of policy?

If you offer (or have to offer) a paid parental leave policy as part of your employee benefits package, you’ll need to budget for it. To afford this type of benefit, you may need to increase prices strategically or cut back expenses in other areas. But trust us, it’s worth it. For one, think about how much it would cost to replace your employees. Spoiler alert: It could be a lot.

While benchmarking data from the Society for Human Resources Management (SHRM) indicates that the average cost per hire is $4,700, the same article from SHRM that reported that number also shared that the total cost can be much more. How much more? Three to four times the salary for the role, when factoring in the soft costs of organizational leaders taking time away from business goals to screen and interview candidates. In addition, the effects of losing top talent could ripple across your company, and develop in the form of poor business performance or damage to the company’s reputation.

Work with a human resources professional to project the actual cost of offering paid leave to your team and how often you might need to use it. Chances are slim that everyone on your team will go out and grow their family at the same time, which means you won’t have to shell out for parental leave for each and every employee all at once.

Still can’t afford to provide a paid stretch of time? Then consider having a portion of the time paid and some of it unpaid, so people can still reap some of the benefits of a meaningful leave policy.

How to build a thoughtful parental leave policy

Ready to offer paid family leave (or both paid family and medical leave)? We’ve put together some tips to help you develop the best possible policy for your team—and your business.

1. Leave room for flexibility

Some companies allow parents to take leave when they need it most, whether that’s before or after the child arrives. Under the FMLA guidelines, people can take 12 weeks during a 12-month time frame, which employees can then spread out before or after the birth of a child, or with the placement of a child for adoption or foster care.

You can also allow people to chunk it out so they can take their leave at periodic intervals throughout the year after they welcome the new child.

Give your team room to get creative. For instance, they can start with three- to four-day workweeks in the beginning, or take leave when their co-parent isn’t taking theirs, to spread out the amount of time they don’t have to pay for child care. You also might ask them for input before creating your parental leave policy. This flexibility allows for a more thoughtful move back to the office.

2. Define who’s a parent

So, who gets to take advantage of parental leave? Outline these details in your policy, and don’t forget to specify when parental leave doesn’t apply. For instance, if both parents work for your business, are they each eligible for the benefit?

Here are some examples of how you might define “parent”:

  • Biological mother or father, gender-neutral partner, or same-sex partner
  • Step-parent
  • Foster parent
  • Adoptive parent

It’s also a good time to check whether you recognize an employee as a parent in one scenario, but not in others. Consider adjusting your policies so they’re consistent across the board. 

3. Consider a “leave share” program

Back in 2015, Amazon launched an innovative addition to its policy: They allowed parents to share leave with their partners.

Under the program, an employee can share up to six weeks of their paid leave with a partner—so long as the partner doesn’t benefit from their employer.

4. Make the transition easy

More than 40 years ago, when Patagonia was still a young company, it began to provide on-site child care. Being forward-thinking has many benefits for employees and employers, and while your small business may not be in a position today to offer something like that, you can create a transition program to help new parents have an easier time getting back into the swing of things. It can also help increase the odds that they will return to work.

Need ideas for how to design it? For example, PwC has received praise in the past for creating a Mentor Moms program that connected new moms or moms-to-be with other PwC moms to receive the insights of their experience juggling motherhood and career. Your own similar policy could offer real-life advice, community-based support, and mentorship for any parent who uses the leave benefit.

Another option is to allow new parents the ability to work from home or work part-time right when they get back. Amazon has a dedicated “Ramp Back Program,” where employees can return part-time in the beginning to ease their way back to a full-time schedule.

If your business requires employees to frequently travel, you can consider covering the cost of a breast milk shipping service for new moms. While Johnson & Johnson, Airbnb, Hilton, and many tech and finance companies provide this, it’s still not widely offered, even though it makes some of the logistics associated with traveling for work easier for new moms.

5. Stay gender neutral

You know what rocks? The fact that every family is different. So make sure your policy reflects that truth.

Instead of singling out a certain gender or family dynamic, ensure the language and rules you lay out apply to everyone. If you offer maternity leave, offer paternity leave as well.

Here are sample policies from Sanofi and Women Employed to illustrate what gender-neutral language looks like.

6. Check if your policy promotes equal pay

Taking time off to bond with your new kid is important—but some research shows that time out of the workforce is associated with lower wages. And because women are more likely to take parental leave, they’re more likely to feel the effects of pay disparity.

But when both parents share child care, it levels the playing field. You can help by creating an inclusive parental leave policy that encourages all parents to take time off—regardless of gender, sexual orientation, or family structure. For example, your parental leave plan might offer:

  • Paid leave to the parent who gives birth, for recovery. 
  • An additional chunk of paid leave for bonding is available to both parents. 
  • Money toward adoption expenses.
  • A back-to-work transition program for all parents who take time off.
  • Employee 401(k) contribution matches throughout the parental leave, with an ongoing equity vesting schedule.
  • Childcare subsidies to help parents with the financial impact of returning to work.

7. Offer additional support for expenses

For instance, PwC reimburses parents up to $1,000 for backup child care per year when their typical form of care falls through at the last minute. And Domo, a Utah-based software company, gives mothers $2,000 to buy maternity clothes so they can feel more comfortable in the months leading up to the big day. They also give $1,000 to spend on anything for newborns.

8. Capture the details in your employee handbook

A thoughtful parental leave policy is one of the most important ways to keep your team feeling happy. Once you’re finished wrapping up the details of your policy, get it approved by an HR expert, and then slip it into your employee handbook. It should include logistical details, such as:

  • How to apply for parental leave.
  • Eligibility requirements, such as completing a minimum number of service hours.
  • The maximum number of weeks an employee can take.
  • Whether benefits are limited in the event of multiple births or adoptions in the same 12-month period.
  • If the employee needs to exhaust other paid leave, such as vacation and sick leave, prior to taking parental leave.
  • Whether the employee will be paid. If so, what pay rate can they expect?
  • When the parent can expect paychecks if they’re on paid leave.
  • If the policy applies to union workers.
  • Whether parental leave will run concurrently with FMLA leave.

After that, ensure everyone—parents and non-parents alike—has the latest version.

9. Update your policy periodically

Keep an eye on laws that affect this benefit. If your city or state starts requiring paid leave or adjusts the rules surrounding it, you’ll need to make sure your business is compliant. 

You also might make changes based on what is—and isn’t—working. Your employees might have ideas about how you can provide better value to the team.

10. Practice what you preach

Every employee should take advantage of their company’s parental leave policy, no matter their role. Doing so sends a message to the rest of the team that it’s not only okay to take it, it’s encouraged. Parental leave is a right that every employer should protect—and every eligible employee should use.

Get cracking on a policy that’s compliant, true to who you are, and makes sense for your team. And then, watch as everyone feels way more relaxed (and stoked!) as their little ones make their worldly debuts. A thoughtful parental leave policy is one of the most important ways to keep your team feeling happy.

Parental leave FAQs

What’s the difference between parental leave and maternity leave?

Parental leave is a broader term encompassing leave for both mothers and fathers, fostering gender equality in caregiving. Maternity leave specifically applies to biological mothers, allowing them time off before and after childbirth.

What types of parental leave options are there?

According to FMLA, businesses with 50 or more employees must offer unpaid parental leave—12 weeks of job-protected leave—for eligible employees. Those qualifying employees must have worked at least 1,250 hours over the course of one year at a location within 75 miles of where all those employees for the company work.

But companies, regardless of the size, can offer a leave policy that exceeds what’s mandated by law. It may cover 100 percent of an employee’s during leave or a portion of it within any range of time, such as one week or several months, though many cover three months. Some employers also allow for shared parental leave or flexible work arrangements.

What are the benefits of paid parental leave programs?

Some of the arguments small businesses might make against implementing a paid parental leave policy include cost, additional staffing, the potential for increased workload and strain on the other employees, or administrative implementation. But the National Partnership for Women & Families reports that research and data prove that paid leave reduces turnover (and the costs associated with it to backfill roles), in addition to increasing productivity and morale. Plus, having a paid leave program helps small businesses recruit talent; small businesses in states with public programs that share the cost of paid leave have found that the benefit helps them compete against larger businesses. These are the states with paid family leave systems:

  • California
  • Connecticut,
  • Colorado
  • Delaware
  • Maine
  • Maryland
  • Massachusetts
  • Minnesota
  • New Jersey
  • New York
  • Oregon
  • Rhode Island
  • Washington
  • District of Columbia (DC)

Balancing all those factors is crucial to crafting parental leave policies that benefit both employees and employers, promoting a supportive workplace environment. To sum up, the pros of paid parental leave can include:

  1. Improved work-life balance: Paid parental leave allows parents to balance work and family responsibilities, fostering a healthier work-life balance.
  2. Enhanced employee well-being: It contributes to the well-being of employees by providing the time and financial support needed during significant life events such as childbirth or adoption.
  3. Employee loyalty and satisfaction: Companies offering paid parental leave often experience increased employee job satisfaction and retention.
  4. Enhanced corporate reputation: Companies that prioritize family-friendly policies tend to enjoy a positive corporate reputation, which can be beneficial for customer relations, attracting new talent, and brand perception.
  5. Reduced burnout: Parental leave can help reduce employee burnout, leading to better mental health, increased productivity, and higher retention.
Kim Porter Kim Porter covers personal finance topics for AARP The Magazine, Bankrate, U.S. News & World Report, Reviewed, Credit Karma, and more. When she’s not writing, you can find her training for her next race, reading, or planning her next big trip. Twitter | LinkedIn
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