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

Kim Porter  
Parental leave policy

Parental leave is a chunk of time an employee can take off if they—or their partner—have just given birth, if they’ve adopted a child, or in some cases, they’ve become a foster parent.

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 to keep their wages or salary while they’re taking time off. So, they could be earning zilch while on leave.Imagine going 12 weeks without a single paycheck—while you’re contending with all the intense joy, upheaval, and expense that a baby brings. Giving birth costs, on average, $4,500—and that’s with insurance. (It can be significantly more expensive if there are complications.) 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 parental leave, even if they’re not required to.

Why do they bother?

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 attract talent, 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 that has no paid parental leave law in place. However, we do have something called the Family and Medical Leave Act, or FMLA, which tells employers what they can and can’t do about unpaid leave.

Specifically, the FMLA requires companies with 50 or more employees (who are located within 75 miles of an office or worksite) that they need 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 the federal FMLA rule are various state rules that pack in even more weight. For example, Massachusetts, California, Rhode Island, and New Jersey all mandate companies to provide paid leave, which makes the “unpaid” part of the federal rule not applicable.

Unsure which law applies to you? See what your state says here.

How should I budget for this type of policy?

As a business owner, you plan for lots of regular expenses, from tax payments to office supplies, employee health care, and the costs of keeping your office open. Paid parental leave is no different, so you should consider it a normal business expense. (And in some cities and states, you have to budget for it.) After all, employees are humans—and having a child is a pretty normal human event. 

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. Gallup reports that the cost of replacing an employee can cost between 50 percent to 200 percent of the employee’s salary. And the effects of losing top talent could ripple across your company.

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 roll? 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 timeframe, which employees can then spread out before or after the actual birth or adoption, or when foster care begins.

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. For example, does your business allow a step-parent to add a new stepchild to their company health insurance plan, but isn’t allowed to take parental leave for bonding? 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 receive the benefit from their own employer.

4. Make the transition easy

A transition program can help people have an easier time getting back into the swing of things.

It can also help increase the odds that a parent will return to work.

Atlanta law firm Alston & Bird created a program that connects new moms with mentors once they return from leave. Most of the mentors have already gone through the experience of having a child, so they’re ready to offer loads of support as new moms ramp back up. Your own policy might offer mentorship for any parent who decides to use 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 and then ease their way back to full-time. Spotify offers flexible work options through its “Welcome Back!” program for all full-time employees, including the ability to work from home, work part-time, or work at various hours.

Easing your way back can make the transition a lot less overwhelming.

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, make sure the language and rules you lay out are applicable to everyone. 

Here’s a sample policy from Women Employed to give you a taste of what gender-neutral language can look 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, 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.
  • Child care subsidies to help parents with the financial impact of returning to work.

7. Use it as a time to celebrate

Many companies sweeten the whole pregnancy deal with extras. Utah-based software company, Domo, 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 both co-parents $1,000 in cash to help with all the new expenses.

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, make sure everyone—parents and non-parents alike—get their hands on 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.

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.

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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