Fun fact: paid parental leave would be a more worthwhile financial investment for many, if not most, companies than a 401(k) match.
For one, the financial value of a 401(k) match (or any other financial wellness program, really) pales in comparison to the impact on long-term earnings working moms (and families) face. Up to 40% of working mothers quit after birth, and most leave the workforce for at least 6 months. The lost income for 6+ months is equivalent to a decade of company-matched 401(k) contributions.
For another, parenthood drives largely avoidable turnover. Without 12+ weeks of paid maternity leave, 40-50% of birthing mothers will quit the year they have a child, often before birth. This turnover can be reduced by up to 70% with an effective paid parental leave policy of 10+ weeks and a return-to-work support program to ensure a safe return to full-time.
A robust paid leave policy may sound like a lot of time and money to set up and manage. However, studies consistently show that paid leave increases employee retention, especially in a volatile and competitive job market — and saves companies tens of thousands of dollars annually in replacement costs. Independent studies have found paid leave has a higher ROI than other programs companies already offer to their employees.
While only 3-6% of employees may have a child each year, 30-50% of employees consider or plan to have a child within the next few years. Prospective employees who plan to have children are more likely to gravitate toward companies perceived as more family-friendly, offering adequate paid parental leave and tools like one-on-one support and guidance.
Once considered an ancillary policy or incentive, paid parental leave has catapulted into the mainstream as a necessary workplace tool—and provides cost savings over both the short and long terms for employers.
Birthing parents with access to paid parental leave prior to birth experience an 80% reduction in c-sections and birth complications and a 51% decreased risk of rehospitalization, due to reduced stress. They are also more likely to receive preventative care and get properly evaluated for postpartum depression and other disorders, which leads to improved post-birth outcomes and shorter recovery times. This raises the prospect of birthing moms feeling mentally and emotionally supported to return to work full-time — and reduces companies’ medical expenses on the most expensive medical event for younger employees.
Many employers only offer birth mothers paid maternity leave as the “primary caretaker,” while fathers and other non-birthing parents, as the “secondary caretaker,” get little to no paid parental leave. This often forces many women to temporarily, or permanently, leave the workforce, as paying for childcare is unaffordable.
However, moms with access to paid leave are also more likely to return to the workforce, often to their original jobs rather than find a new one or leave the labor force entirely. Paid parental leave is also linked to increased employee loyalty and a 15% increase in average tenure, reducing baseline turnover costs. States with paid leave policies also saw a 20% reduction in female employees leaving jobs in the first year post-birth and up to 50% reduction after 5 years.
Comprehensive paid parental leave is also a key incentive for current job-seekers. 86% of U.S. Millennials are less likely to quit if it’s offered, and 75% of employees have said their companies’ paid leave policy made them more loyal to the company.
Current turnover costs average 33% of an employee’s annual salary and increase in highly competitive fields. The costs to recruit, interview, and onboard, combined with downtime in productivity and output, far outweigh the costs of a comprehensive paid parental leave program for all employees. And depending on which policy your company adopts, a paid parental leave policy typically costs less than 1% of total annual wages.
California’s Paid Family Leave (PFL) program is a prime example of paid leave effectiveness. 87% of California businesses saw no increased costs after the paid leave program went into effect, and 9% even reported saving money thanks to lower employee turnover rates and/or lower spending on employee benefits.
Companies increase retention rates, boost employee morale, and save thousands on turnover costs, while parent employees get paid time off to heal, bond with their child, and plan for return to work.
401(k)s may be more universal, but a comprehensive, fully insured paid parental leave policy that also provides unlimited support and coaching to ensure employees return to work costs considerably less while directly improving workforce outcomes and the employee experience.
