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Why Offering Paid Maternity Leave Is Good For Business

Source | FastCompany : By LAURA VANDERKAM

When it comes to maternity leave, not all companies see the costs and benefits in the same way.

All of the companies on Working Mother magazine’s 100 Best Companies list—released today—offer at least a few weeks of fully paid leave (an average of nine weeks, up from eight last year). Companies in the top 10 offer an average of 11 weeks. Contrast this with the U.S. private sector as a whole, where, according to Working Mother’s numbers, only 26% of employers offer coverage beyond short-term disability leave. Only three states and six cities have enacted paid parental leave programs for their workers this year.

That’s quite a gap. It raises the question of how these organizations perceive the economics of leave. While a better-than-average policy may land a company on a magazine’s list, is there any business benefit to be gained beyond that?

Conversations with a few companies that have increased paid leave over time suggest that sweetening leave packages is not just about warm, fuzzy feelings. To be sure, companies often change many benefits at once, meaning it’s difficult to attribute outcomes to any one change. But paid leave, they report, can generate returns in two areas.

HELPING WITH RETENTION

Replacing people is expensive. This is especially true for specialized, skilled work. “The number that tends to get thrown around is 150% of an individual’s salary,” says Barbara Wankoff, executive director for diversity and inclusion atKPMG. If a company has gone to the trouble of hiring and training someone, avoiding voluntary turnover boosts the bottom line.

Some new mothers are 100% sure they want to stay home with their babies. Some are eager to get back to work. But many have mixed feelings. If the transition back to work after giving birth is too difficult, a mother might decide it’s not worth it.

Companies with longer paid leaves recognize that there is a huge difference between an 8-week-old baby, who may be waking up multiple times per night to eat and who might not have good head control yet, and a 16- to 18-week-old baby, who has a good chance of sleeping through the night, may be starting solid foods (reducing the pressure on mom for breastfeeding), and can smile and interact with other caregivers.

Accenture, the consulting company, doubled its paid maternity leave last year, to 16 weeks. According to Stacey Jones in Accenture’s media relations department, the firm subsequently saw a nearly 40% reduction in the number of moms leaving their jobs after the birth or adoption of a child.

KPMG likewise increased its leave in 2014 from roughly eight to 10 weeks to up to 18 weeks (representing a combination of disability leave and paid parental leave). From employee surveys, Wankoff says, they knew that “if we could get people through their first year after the birth of a child, we had a much higher success rate of retaining them for the long term.”

The policy is new, but in terms of retention rates, “we have seen some slight movement in the first year,” she says. New parents also get access to transition counseling to help them figure out how to juggle work and life. “Our leaders and our partners really do see this as a short-term investment for long-term gain,” says Wankoff. Paying an additional 10 weeks of salary, plus the cost of coaching, is much cheaper than paying the equivalent of 78 weeks in replacement costs (that’s the 150% of salary figure).

BOOSTING RECRUITING

IBM increased its paid parental leave policy recently, with new moms now getting around 14 weeks. “The ROI comes in the form of attracting the best talent in the industry, and in having an engaged workforce,” says Lindsay-Rae McIntyre, IBM’s chief diversity officer.

Companies that do (or want to) hire young women find that paid weeks off is an easy number for potential hires to compare between companies. Young men increasingly care about paternity leave policies too. As McIntyre points out, “There is a lot of activity in the marketplaces around formal leave policies.” If a competitor makes a move, an organization needs to be at least close to avoid awkward recruiting conversations.

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