During our Leadership Forum event, we were fortunate to have Jeff Nowak, Shareholder at Littler Mendelson and author of the popular FMLA Insights blog, give a presentation on trends in the paid leave landscape. During that session, one attendee asked if there was any discussion at the state level regarding the impact these leaves were having on workforce management for employers and businesses: financial effects, and potential abuse of these state-mandated paid leave programs.
Jeff said that, generally, he was not seeing states review the impact paid leave programs are having on employers. He did mention that the state of Colorado was setting up a taskforce to look at paid leave, which would most likely look at the impact it will have on businesses.
This conversation reminded me of a study on the impact Paid Family Leave has had on the state of California. Eileen Appelbaum and Ruth Milkman surveyed employers and employees across 253 private and nonprofit organizations before the program was rolled out and six years after implementation. 500 employees who had experienced a relevant event were surveyed, and 20 worksites were selected for in-depth interviews.
Impact of PFL on Employers
Employers are often concerned about the impact paid leave programs will have on their profitability and on employee morale. Will the cost be burdensome? Will employees try to scam the system?
California businesses voiced these concerns before that state’s Paid Family Leave (PFL) law went into effect. Six years into the program, though, Appelbaum and Milkman found that these concerns were not born out. 87% of employers reported no increased costs. This makes sense, because the California program is funded by an employee-paid tax. The small fraction of employers that did report increased costs spoke of costs related to providing coverage when employees are out. It’s worth noting, though, that this cost presents itself regardless of whether a PFL law is in place. In fact, 9% of employers surveyed reported that California’s PFL program helped them save money because they were able to streamline their existing paid benefits.
Employers saw indirect financial benefits as well. For example, employee turnover rates went down. Fewer employees left the workforce, and, among employees in jobs with lower salaries and less generous benefits, 83% returned to work with the same employer (as compared to 74% without PFL).
89% of employers reported that productivity either went up or was unchanged. 99% of employers reported that employee morale either went up or was unchanged. Other research has shown long-term positive impacts on children when their parents have access to paid parental leave, so in a way, PFL is an investment in the workforce of the future, too!
There does not appear to be an issue with fraudulent claims, either. Six years into the program, 91% of employers surveyed said they were unaware of any instances where employees abused California’s PFL.
While the above statistics don’t necessarily prove that there is no impact on employers, it does show that six years on, the concerns of many employers in California were unfounded.
Where Do We Go from Here?
Changing our perspectives on paid leaves can be tough, but the data shows that it would be wise to do so. With an aging population and a rise in the cost of living, we see more and more employees trying to figure out a balance between work and family needs.
This research shows that offering paid leave can have positive impacts on both employers and employees. If your state doesn't provide paid leave benefits to employees yet, you might consider implementing a company-wide paid leave program to support your employees.
If the above is not enough to make the case, I encourage you to read the report in full. It goes into more details on a variety of other factors.
If you’re interested in learning more about employees’ understanding of the benefits available to them, we can help. Download our comprehensive Leave of Absence Explainer guide that our absence experts have put together for you.