Popular, Complex New Benefit: Paid Family Leave Makes Work Flexible

Some employers are providing paid family leave (PFL) as a popular addition to employee benefit packages, and are finding that it can help improve employee engagement and productivity.

While large employers in technology, finance, consulting, and legal are leading the charge, other industries and smaller employers are beginning to offer PFL as well. Historically, paid parental leave (PPL) was the benefit launching point that evolved into PFL with broader benefits. The news media frequently discuss the two interchangeably, which can be confusing.

PFL is a complex benefit with multiple factors affecting cost and perceived value to employees:

• What family leave purposes are covered? Options include: bonding at birth or adoption; caring for parents; caring for spouses; caring for children; personal healthcare; domestic abuse or stalking response; and military family leave.
• What is the level of mandated wage replacement? State PFL and local laws vary as to percentage of wage replaced, and the maximum cap on total weekly benefits. States offering PFL include California, New Jersey, Rhode Island, New York (beginning Jan. 1, 2018), and District of Columbia (beginning July 1, 2020). Employers have more freedom to design custom PFL packages for their employees if unaffected by these jurisdictions or similar municipal laws.
• What is the duration of the benefit? In Rhode Island it’s four weeks, in California and New Jersey it’s six weeks, and New York begins at eight weeks and will reach 12 weeks by 2021. In these four states, the program builds on state temporary disability insurance programs. The District of Columbia will require from two to eight weeks depending on leave purpose. U.S. corporate benefits run as high as 20 weeks of PPL at Twitter, 26 weeks at Etsy, and 12 months at Netflix.

Employers consider several questions when designing a PPL or PFL program:

• Are benefits required to run concurrently with FMLA or other job-protected leaves?
• Is this benefit for continuous leave only, or intermittent also?
• What are our minimum time increments in hours, days or weeks?
• Do we require an elimination waiting period before the benefit starts?
• What job categories are eligible for benefits?
• Should full benefit parity for both genders be provided across all leave purposes?
• Should variable length of leave caps be provided based on the leave purpose?
• Should variable length of leave caps be provided based on length of service?
• Is there coordination with other benefits to reduce cost, fill gaps, or provide superior benefits?
• How will the benefit be administered: internal, co-sourced, or outsourced?

Employers that provide PFL see it as part of a flexible workplace that can produce several positive outcomes, according to the 2016 National Study of Employers by the Society for Human Resource Management. The study found that employees in more effective and flexible workplaces are more likely to have higher engagement, increased levels of job satisfaction, stronger intentions to remain with the employer, less negative and stressful spillover from job to home and vice versa, and better mental health.

Rejecting Gender Roles

PFL advocates insist that it is not exclusively for new mothers or primary caregivers. Some employers are beginning to act on that, especially the PFL early adopters, according to suppliers and employers at the IBI Annual Forum in March.

“We recognize that caregiving is evolving alongside our economy and the nature and demographic composition of our workforce. Today, both men and women of all generations face challenges in meeting the demands of work and life,” said Eileen Fernandes, Principal, Deloitte. “We believe gender- and generation-neutral caregiving support programs like Deloitte’s positively impact the economy, worker productivity, and business.”

In May 2016, Deloitte commissioned an online poll of employed adults in the U.S. with access to benefits in the general population, and found that 88% wanted a broader benefit for family care beyond parental leave. By September 2016 Deloitte expanded its own benefit, providing its eligible U.S. professionals up to 16 weeks of fully paid family leave to support life events — from the arrival of a new child, to caring for a spouse or domestic partner, to dealing with the deteriorating health of aging parents. Birth mothers may also pair this paid family leave with any short-term disability benefits for which they are eligible.

Deloitte’s use of gender-inclusive language address a key concern of PFL advocates and a company culture that encourages both women and men to take parental and family care leaves address a key concern of PFL advocates. “When women are viewed as primary caregivers, this tends to hold them back in careers,” said Vicki Shabo, VP of Workplace Policy Initiatives for the National Partnership for Women & Families. Children need to bond with both parents, she said, so a gender-neutral approach is good for families. Other gender-neutral language used in PFL programs and communications are “co-parent,” or “secondary parent,” or “non-birthing parent.”

Yet even as broader paid family leave becomes more available, employees — particularly men — are showing some reluctance to taking it. More than one-third of poll respondents in Deloitte’s 2016 parental leave survey felt that taking parental leave would jeopardize their position, more than half (54% overall and 57% of men) felt it would be perceived as a lack of commitment to the job, and 41% felt they would lose opportunities on projects.

But despite a lingering stigma or the perception of a stigma around taking caregiving leave, broader PFL is popular with workers. Deloitte has found that its generous PFL program has created a positive buzz during the company’s campus recruiting efforts and among current employees.

Another corporate leader in PFL benefits, Patagonia, identifies several paybacks from its position on PFL, said Shannon Ellis, Senior Director of Human Resources. “We received a 40% increase in online job applications after our CEO took a public position on the Family Act” (proposed federal legislation to create a national paid family and medical leave fund, paid for through shared employer-employee contributions), she said. Patagonia’s employee turnover is “very low, even in retail and distribution centers that typically have high turnover,” Ellis said, and Patagonia scores very highly across several measures of employee loyalty.

Small Employers and PFL

Among employers with 500 employees or more, 21% provide some form of PFL benefit to employees, compared to 13% of private sector employers overall, according to the Bureau of Labor Statistics. Smaller employers that provide specialized services and compete with larger employers — such as consultants and law firms — are much more likely to provide PFL.

Smaller employers are affected by the same employee family needs that drive PFL benefit decisions at major corporations. Half of all employees expect to provide eldercare in the next five years, and 43 million adults provided unpaid care to an adult or child in 2014, according to the Center for Work Life Law at the University of California, Hastings. While PFL covers many leave purposes, the California Employment Development Department in 2015 said that employees used California’s PFL benefit primarily for the following:

• Parental well-child bonding represents 88% of leaves.
• Family care represents 12% of leaves, including child caring for parents (one-third of this group), spouse caring for spouse (one-third), and parent caring for children (one-fourth).

For some smaller employers, laws in their primary state mandate PFL, making this a simple compliance decision. Although state or local paid sick leave laws are more prevalent, PFL laws are proliferating; PFL legislation for bonding and care is proposed in 18 states.

Especially among smaller organizations, not all employers can initially offer generous PFL benefits across the full spectrum of leave needs. “It’s like a toe in the water for some employers,” said Heidi Pottgen, AVP National Absence Management Practice, Aon. “They can provide parental leave for bonding with a well child or eldercare to care for a sick parent, but not care for all sick family members.” Because PFL has so many leave categories and benefit levels, it’s possible to expand this benefit incrementally over time, which most employers have done, including corporations with best-in-class leave programs.

Many employers, large and small, are initially driven by state laws when they explore adding a PFL benefit. Levi Strauss & Co. was required by California law to provide up to six weeks of PFL for California employees at 55% of pay. San Francisco’s new law requires employers there to top the benefit up to 100% of pay for six weeks in 2017, up to a maximum weekly cap of about $1,100.

“We began with how to comply with the laws, then looked at expanding this benefit to the whole country,” said Mary Chavez, Global Compliance and Employee Relations Manager. They estimated the cost at various benefit levels with the help of a consultant, and decided to launch with a benefit of eight weeks for baby bonding. This is also available to hourly, non-exempt employees. It is rare to provide PFL benefits to this job category in a manufacturing organization, making the Levi Strauss PFL program ground-breaking in its industry.

What to Do When…

With a benefit program this complex, numerous challenges can arise.

Fernandes said company culture plays an important role in mitigating employees’ concerns about taking PFL. “We realize not everyone has the same personal and professional priorities. So when starting new projects, for example, we invite staff to discuss ‘How are we going to support flexibility and each other’s unique needs?’” said Fernandes. “Putting that discussion on the table up front is an example of how an inclusive culture is closely tied to well-being.”

It takes work to ensure that a PFL benefit provides a consistently positive employee leave experience. “One of the key obstacles to a successful leave of absence program is the challenge of implementing frequent and mandatory training programs to address the conscious or unconscious bias among managers about family leave and flexible work that can lead to discriminatory behavior,” said Anna Steffeney, LeaveLogic CEO. According to the 2016 DMEC Employer Leave Management Survey, manager training is one of the top leave management challenges.

Also, employees may be tempted to use the PFL benefit for inappropriate purposes. Levi Strauss’ PFL program “is not a daycare alternative; it is to bond with your child,” said Chavez. To support that goal, Levi Strauss approves a minimum two-week PFL increment, and needs a review to approve less than that. “We had to train employees on this; it took a while to get the message through that this benefit is not about personal convenience.”

When a PFL benefit is announced, some employees will have a qualifying event that ends before the benefit is available to use. This can create frustration or resentment — the opposite of the program goal. An employer may announce a parental leave that will launch in six months and an employee complains, “but I just gave birth, let me use the benefit now!” To avoid ill will, Chavez said that employers should consider making the benefit retroactive under specified circumstances.

In a similar PFL risk factor, if the level of income replacement provided is so low that employees cannot afford to take leaves, that also could generate ill will. People initially assess a PFL benefit by the number of weeks provided, but it’s the level of income replacement that will determine whether a PFL benefit is utilized.

Co-workers might be resentful when a new parent takes an extended leave, but “another issue is managers who want employees back as quickly as possible,” said Alyona Richey, Senior Manager of Benefits at McDermott Will & Emery LLP. Some new fathers in their law firm take intermittent leaves to manage their workload during the busy season.

Even when employers outsource PFL administration, they still retain certain obligations. It’s important to know what those obligations are, and how to meet them. Employers need to work closely with their PFL administrator to clearly define the qualification to receive the PFL, coordinate pay, ensure that leaves can be efficiently tracked, and manage the return-to-work process.

Conclusion

Paid family leave is a popular benefit that aids recruiting, according to employers that provide PFL. It may also boost engagement and productivity, especially when it’s used to help support flexibility in a high-performance workplace. PFL can be a complex benefit that has a learning curve for employees, their managers, and benefit administrators. Because the U.S. still has no overarching federal PFL laws, employers are more free to experiment with the numerous benefit configurations that are possible. By targeting PFL leave purposes and benefit levels, employers can develop highly customized programs that meet company goals with key employee populations.