Why Cuts To Corporate Paid Parental Leave Could Impact Smaller Businesses

As companies of all sizes adjust to the pandemic’s ongoing effects and confront inflation, benefits are on the chopping block—and this year, parental leave is shrinking. 

According to data reported in the Wall Street Journal, the percentage of employers offering maternity leave beyond the unpaid leave required by federal law dropped from 53% in 2020 to 35% in 2022. Paternity leave benefits are also on the decline, dropping from 44% in 2020 to 27% in 2022.

Because the US is the only industrialized country without a nationalized paid parental leave policy and one of only 6 OECD nations worldwide not to do so, employer benefits are often the only opportunity for employees to access paid leave. However, not every business is equipped to offer robust paid parental leave, with larger companies having an advantage over small businesses.

Now the question: does this shift in big business actually open an opportunity for your small business?

Why Offer Parental Leave?

There’s no question that paid parental leave benefits are a positive offering to employees. Doing so bolsters employee satisfaction and employee retention—which, in the Great Resignation, may be more important than ever before.

Employee retention isn’t just a feel-good benefit for a business: according to the National Partnership for Women and Families, it’s also good for the bottom line. “Turnover costs are estimated to average 20% of an employee’s annual salary,” it found. “And when workers don’t have access to paid leave, they are more likely to need to leave their jobs.”

There’s also an unquestionable health benefit for the post-partum employee and new baby alike. The American Psychological Foundation, which supports paid parental leave, states that many women return to work before they are physically or emotionally ready because they fear workplace discrimination if they take longer than alloted by law. 

Can Small Businesses Afford Paid Parental Leave?

While the benefits of offering paid parental leave are undeniable from the employee standpoint, the cost-benefit analysis becomes a bit more complicated for employers—especially for smaller businesses. 

According to the Harvard Business Review, there’s a sizable inequity between the paid parental leave offerings between large and small businesses: only 15% of companies with 99 or fewer employees have access to employer-provided paid leave, compared to nearly 33% of workers at large companies. Without paid leave, it’s hard for small businesses to compete for employees, which can negatively affect profit. 

The Small Business Majority polled small businesses in 2017—before the pandemic, importantly—and here’s what it found in terms of paid-leave offerings:

• 26% offer maternity leave
• 37% offer both maternity and paternity leave 
• 34% say they do not offer any parental leave 
• For those employers that do offer parental leave, the vast majority offer paid parental leave: 69% offer full or partial pay and 18% offer pay depending on the employee. Only 13% do not offer any paid parental leave 

Despite not every small business being able to offer this benefit, the data clearly shows that small businesses overwhelmingly support the idea of paid parental leave for their employees. Roughly 70% of small businesses, the Small Business Majority also found, would support “legislation establishing a national paid family and medical leave insurance program” —far more than those able to offer it out-of-pocket,

Next Steps for Paid Parental Leave

As bigger businesses cut their parental leave, smaller businesses might consider seizing this opportunity to recruit top talent away. If you’re not sure whether your own business can afford to extend this benefit, however, consider the suggestions from the Harvard Business Review, which starts with a cost-benefit analysis that looks at whether turnover at your company is costing more money than offering paid leave would. In other words, would it make financial sense for your business to extend this benefit?

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