In today’s competitive market, offering a compelling employee benefits plan is essential for attracting and retaining top talent. Among these benefits, paid company leave has become increasingly popular and can reduce turnover by up to 69%.1

However, convincing executive leadership to introduce such benefits, especially when budgets are tight, requires preparation. Developing a comprehensive business case that includes a financial budget analysis will be helpful to human resources (HR) and benefit team leaders when seeking executive buy-in for offering paid leave benefits.

Understand Priorities

Before diving into the numbers, identify your executive leadership team’s priorities. While these can vary by industry and individual executive, they typically focus on:

  • Return on investment (ROI): Executives want to see how the program will influence the company’s bottom line, including short-term costs and long-term financial gains.
  • Employee retention and attraction: The costs of turnover are extremely high. Losing an employee can cost, on average, one-half to two times the employee’s salary. The financial burden depends on the individual’s level of seniority. For hourly workers, the average cost is $1,500 per employee; the cost jumps to 100% or 150% of salary for technical positions. At the high end, C-suite turnover can cost 213% of salary.2
  • Productivity and morale: Happy employees are typically productive employees. Executives will want to understand how paid leave can boost morale and productivity.
  • Compliance and legal risks: Offering paid leave can mitigate legal risks and improve compliance with regulatory requirements.
  • Company culture and reputation: Benefits that enhance company culture and reputation can be significant selling points.

A well-executed budget analysis provides a clear picture of a program’s financial implications and can help you align the proposal with your company’s strategic objectives.

Budgetary Analysis

Next, collect the following information to inform your analysis and demonstrate how an investment in leave programs translates into long-term gains:

  • Current leave policies: Understand existing policies and utilization rates to help identify opportunities.
  • Employee demographics: Analyze your workforce composition, including age, gender, tenure, and work location.
  • Industry benchmarks and reports: Review what competitors and industry leaders are offering in terms of paid leave.
  • Turnover rates and costs: Calculate turnover rates and associated costs of recruiting, hiring, and training new employees.
  • Productivity metrics: Collect data on employee productivity and how it correlates to absenteeism and leave usage. Break out leave use by type (e.g., newborn bonding, an employee’s own serious health condition, or family care).
  • Employee surveys: Conduct surveys to understand employee needs and preferences regarding paid leave. These questions can be incorporated into a larger survey, such as an employee net promoter score survey, on a quarterly or annual basis.
  • Regulatory requirements: Stay informed about local, state, and federal regulations related to paid leave.

Financial Cost Analysis

A well-executed budget analysis provides a clear picture of a program’s financial implications and can help you align the proposal with your company’s strategic objectives. Estimate the financial cost of implementing paid leave, including:

  • Direct costs: Calculate salaries paid to employees while on leave. Deduct other benefits the employee might be eligible for, such as state paid family and medical leave or short-term disability.
  • Indirect costs: Consider costs for temporary replacement workers or overtime for employees covering those on leave.
  • Administrative costs: Factor in expenses related to managing the leave program. If outsourcing absence management, consider vendor fees.

Cost-Benefit Analysis

Compare the total expected costs of implementing paid leave against expected gains to determine whether the gains outweigh the costs and by how much.

  • Costs:
    • Salary expenses: Calculate total salary expenses for employees on leave.
      • Example formula: Total salary expense = number of employees x average daily salary x number of paid leave days
    • Replacement costs: Estimate the cost of temporary replacements or overtime pay.
  • Gains:
    • Reduced turnover costs: Calculate savings from reduced turnover.
      • Example formula: Total number of employees x turnover rate x average cost of an employee’s departure = turnover costs savings
      • Additionally, if you’re not already conducting post-termination surveys, consider starting them. Review recent employee departures and take note of those who cited employee benefits, paid leave, or family/medical needs as reasons for leaving. This information could strengthen the case for providing additional paid leave benefits.
    • Increased productivity: Estimate productivity gains from improved employee morale and reduced burnout.
      • Example formula: Increase in productivity rate x total number of employees x average productivity value per employee = productivity gains
    • Legal and compliance savings: Factor in potential savings from reduced legal risks and compliance. If leave programs are not administered consistently across an organization, it can give rise to Equal Employment Opportunity Commission lawsuits and fines.3

Scenario Analysis

Conducting a scenario analysis strengthens your proposal by showcasing potential effects under various conditions. This approach allows you to present a balanced view and equip decision-makers with a comprehensive understanding of the financial and operational outcomes.

  • Best-case scenario: High employee retention and productivity gains with lower-than-anticipated leave use.
  • Worst-case scenario: Minimal effect on turnover and productivity with higher-than-anticipated leave use.
  • Most likely scenario: Based on average expected outcomes.

Include different plan designs and their budget effects, such as:

  • Length of leave: Typically specified in weeks.
  • Employee eligibility: Determine eligibility criteria (such as minimum tenure, part-time vs. full-time).
  • Rate of pay: Specify the percentage of pay provided during leave, with best practices often being 100% of regular salary.

Presenting the Data

It is always best to schedule a meeting with executive leadership to walk through business case proposal instead of sending it for review so you can present the data and answer any questions or objections real time. Organize your presentation in the following order:

  1. Executive summary: Provide a brief overview of the proposal, including key benefits and estimated ROI.
  2. Current state analysis: Present current leave policies, use rates, and associated costs.
  3. Proposed paid leave benefit: Outline the proposed benefit, including eligibility, duration, and conditions.
  4. Financial analysis: Share detailed cost and benefit analyses using charts and graphs to illustrate key points.
  5. Strategic alignment: Explain how the benefit aligns with the company’s strategic goals, such as improving retention and enhancing company culture.
  6. Implementation plan: In this high-level plan, include timelines, responsible parties, and milestones.
  7. Conclusion: Summarize key points and make a clear recommendation.

Buy-In

To gain executive buy-in:

  1. Align the findings with business goals: Show how the paid leave benefit supports the company’s strategic objectives.
  2. Use data-driven arguments: Back your proposal with solid data and quantitative analysis.
  3. Highlight employee impact: Emphasize how the benefit will help improve employee well-being, satisfaction, and retention.
  4. Show industry trends: Present benchmarks and a competitor analysis to highlight that paid leave is becoming standard practice and is needed to remain competitive.
  5. Address concerns: Be ready to share counterarguments and solutions if objections are voiced during the meeting.
  6. Engage stakeholders: Involve key stakeholders early to gather input and build support.

The goal of the proposal is to build a compelling business case that highlights the financial viability of paid leave and underscores its strategic value. By doing so, you demonstrate a commitment to enhancing employee well-being and positioning the company as a leader in employee-centric practices.

With a well-supported proposal, you have a better chance of gaining executive buy-in and strengthening the organization’s future.

  1. Forbes. How Small Businesses Can Afford Paid Parental Leave. June 3, 2024. Retrieved from https://www.forbes.com/councils/forbesbusinesscouncil/2024/06/03/how-small-businesses-can-afford-paid-parental-leave/
  2. People Keep. Employee retention: The real cost of losing an employee. April 2024. Retrieved from https://www.peoplekeep.com/blog/employee-retention-the-real-cost-of-losing-an-employee
  3. U.S. Equal Employment Opportunity Commission. August 2017. UPS to Pay $2 Million to Resolve Nationwide EEOC Disability Discrimination Claims. Retrieved from https://www.eeoc.gov/newsroom/ups-pay-2-million-resolve-nationwide-eeoc-disability-discrimination-claims.

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