What Does Your Paid Leave Program Say About You as an Employer?

By Terri L. Rhodes, CLMS, CCMP, CPDM, MBA, CEO, DMEC

Paid family and medical leave (PFML) is top of mind as more states implement these laws, and employers consider how they design, pay for, and administer these programs. In addition to operational differences, which can be dizzying for multistate employers, PFML is increasingly important to employees and can influence recruitment and retention.

And that’s in part because statutory and voluntary PFML options that extend access to and eligibility for these paid leaves shine a light on employer culture.

A full day of the 2023 DMEC FMLA/ADA Employer Compliance Conference was dedicated to managing PFML with guidance on how employers determine work state, account for different definitions of family members, address expansions to existing laws, and coordinate benefits. With an increasing number of leave laws in the U.S.¹ and more PFML laws expected, employers would be wise to discuss their options. A few questions to consider:

Will the company pay all associated payroll taxes and fees or split them with employees?
If the company creates a plan, which components will it have to ensure that it meets or exceeds the minimum requirements?
How will we adjust other benefits to avoid conflicts and ensure equity?

Your answers will have far-reaching implications, especially since 47% of the employers that responded to the 2022 DMEC Absence Plan Design and Practices Benchmarking Report² do not offer paid parental and/or paid family care leave. The report comprises data from 2021 and 2022 on how employers structure policies; whether they allow intermittent access to PFML; if policies distinguish between birth and nonbirth parents; and if employees are required to file for state-mandated PFML before they are eligible for company-specific benefits. It will be interesting to see how (or if) those practices change as more states pass and implement PFML laws.

Ready or Not

There’s no question that different versions of PFML are hard to manage, as noted during the “Important Questions Employers Should Ask Before Implementing PFML” webinar³ when 30% of attendees said they were not ready to administer it. They are, however, considering benefit changes as a result of the PFML wave, which is positive since data shows that benefits influence retention. In fact, employees who see value in benefits (including paid time off) are more likely to stay with employers while those who don’t will leave even without a significant wage increase.³

Generous paid leave programs are highly ranked by employees, who ask about company policies before accepting job offers and reject those that don’t meet expectations⁴ perhaps because they see a correlation between paid leave and the value an employer places on employees and the support for work-life balance (or integration).

Customizing Policies

Recognizing this greater visibility of benefits, including paid leave, employers should assess all leave policies to ensure their plans convey a message they intend and, at the very least, one with which they are comfortable. This review will also help identify and address inherent bias. Before implementing anything new or changing programs, ask for feedback from employees. A few questions to consider:

If we roll out this policy, what are the positive or negative aspects, and how do they affect employees?
Does this policy meet the needs of all employees or just a portion?

Once you identify gaps, fill them. And as you consider options, establish a goal and a method for measuring success for the program since some options are more costly than others.

A quick rule of thumb is that if you have fewer than 50 employees in a statutory state, a private PFML might not make sense. However, an employer-sponsored plan can streamline management and show a positive return on investment for companies of all sizes.⁴

Also consider how PFML will affect short-term disability (STD) insurance. Experts say it may be harder to get employees to pay for STD in states that mandate PFML and employees pay a portion of it. In this scenario, employers might consider helping employees pay for statutory PFML plans and offering an STD plan that bridges gaps. Again, there are costs which may or may not be palpable.

If paid leave can differentiate an employer for recruiting and retention purposes, does investing in PFML plans become more tenable for employers of all sizes? Or is now the time for employers to consider redesigning STD plans to provide different types of coverage? And is that an “and” or an “or” question?

Wise employers will conduct an analysis of all options (that tallies costs as well as benefits) rather than choosing one that seems easiest to implement.

A Path Forward

Once a choice is made, communicate it clearly and frequently to employees, highlight unique benefits and value to the program, and train managers and supervisors to address questions and refer employees to appropriate resources.

We frequently hear about the need for more education and training for supervisors. PFML is no exception.

Multistate employers should expect employees to compare benefits with colleagues in different states. And that will be a difficult situation to maneuver through since PFML laws vary widely. Consider developing a one-page state comparison reference that highlights company policy to reduce confusion and to communicate the message you want employees to hear.

While it’s true that PFML laws are increasingly difficult to manage, they can offer an opportunity for employers to walk their talk when it comes to mission, vision, and values, especially as they pertain to employee health and wellness.⁵ It’s one thing to say employee health and wellness is integral to company success. It’s another thing to invest in it.

PFML lowers the eligibility bar for paid leave at a time when employees are raising the bar with employer expectations. How you respond to an increasing number of PFML laws across the U.S. will affect your ability to retain the people you employ today and those you want to recruit tomorrow.⁶