Is paid leave a job killer or creator?

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The notion of paid family and medical leave has been gaining ground for decades with business leaders and politicians alike. It even represented a rare opportunity for agreement during last year’s contentious presidential campaign. But the issue’s fate ultimately hinges on how such benefits are financed.

Most Americans approve of a paid family leave law, according to the National Partnership for Women and Families. But it’s also worth noting that all developed countries guarantee time off for parents and other caregivers, except for the U.S.

Just 17% of employers offered paid parental leave last year, the Society for Human Resource Management estimates. WorldatWork found the number to be closer to 38%.

Despite the low numbers, additional paid family leave time and increased workplace flexibility “continue to climb the scale of what seems to be most important as a prerequisite for employees” across all age groups, says Laura Kerekes, chief knowledge officer at ThinkHR.

While the benefit appeals to Silicon Valley firms or those with deep pockets known for unique and innovative offerings, she sees growing interest from traditional companies that are struggling to draw talent “with the requisite skills or mindsets to work in their organizations.”

However, Rob Wilson, president of Employco USA, recently listed six weeks of paid family leave benefits among five employment regulations that need to be removed or tweaked for job growth to continue unimpeded. Developing a national policy across corporate America would be a boon to recruiting and retention for small employers, which he says are responsible for most job growth.

But, it all depends on how the benefits are financed. For example, Wilson is concerned about a 0.62 % payroll tax in Washington, D.C., adding a burdensome layer to businesses that must comply with 11 weeks of up to 90% paid leave. The D.C. City Council recently agreed to consider easing the sting of this plan on local employers.

While President Trump last year suggested paying new mothers 46% of their salary during six weeks of time off, funded by a reduction in waste and abuse within the unemployment insurance system, Wilson has reservations. Noting similarities to the complex state patchwork of workers’ compensation laws, he wonders how money could be saved on a state-by-state basis.

Existing policies
New York passed the most generous state-backed family-leave policy to date in 2016, while California, New Jersey, Rhode Island, Minnesota and the District of Columbia have paid-family-leave policies, as do San Francisco and Montgomery County, Md.

Also see:16 areas where employers most want help from their broker.”

Several states have paid leave programs that are administered through state-run disability insurance funded by employees. David Gabor, a partner in the Wagner Law Group, says this confines employer expenses to simply creating and administrating a program.

Looking ahead, he believes “a blanket federal program” that mirrors this arrangement would make the most sense to level the playing field for employers on paid leave. “But then you get to the question of how large does an employer have to be for the feds to have jurisdiction?” he asks. “You would run into that issue.”

There’s little doubt that “additional payroll costs for any benefits can impede job growth,” Kerekes argues, but she adds that “not having the right employees” on board can generate the same result. “It’s really a delicate balancing act,” she says.

Nearly one-third of women have quit a job because of family responsibilities, the Pew Research Center notes, while a recent Department of Labor policy brief found that 70% of fathers who took paternity leave used only 10 days or less.

A 2015 DOL report suggesting the median cost to replace a typical worker is about 21% of the individual’s annual salary is titled “The Cost of Doing Nothing: The Price We All Pay Without Paid Leave Policies to Support America’s 21st Century Working Families.”

Broker perspective
Brokers and advisers need to deliver a “cogent message” explaining why instituting paid leave might make sense for their employer clients, Gabor explains. Advantages include lower employee turnover, as well as higher morale and productivity.

Paid leave is top of mind among HR and operation managers, but “not as much” among benefit brokers who are commission-driven based on an employer’s healthcare spend, according to Wilson. “They’re trying to help maximize benefits that are HR-related,” he says, though that could change as brokerages become more fee-based as a result of healthcare reform.

Adds Kerekes: “Like it or not, brokers are in the HR business, and the good ones we work with are definitely not ignoring this topic. They realize that in order to be that trusted adviser, they need to be able to help the client consider their overall human capital strategy and getting the best full benefit package in place in order to thrive.”

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