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The Future of Work

How Netflix's New Parental Leave Policy Will Impact The Economy And The Gender Wage Gap

Netflix's promised year of parental paid time off is a bold bet on its staff, but it could also have an impact on the economy.

[Photo: Flickr user Angie Stalker; App Photo: Zoran Vukmanov Simokov via Shutterstock]

Netflix just made a major announcement and it has nothing to do with a new original series or distribution deals. It’s about parents.

Particularly those who are about to become parents among its staff of its streaming service (the DVD business and other divisions are not included.) In a statement posted yesterday on the company’s blog, Netflix chief talent officer Tawni Cranz announced the introduction of unlimited leave for new moms and dads. The policy will allow them to take off as much time as they need during the first year after a child’s birth or adoption.

This tops tech companies offerings such as the 17 weeks with pay at Facebook and $4,000 cash. At Yahoo, benefits range from 16 weeks paid leave for new biological moms, but fathers and adoptive parents only get eight weeks. Google, Microsoft, Pinterest, and Twitter similarly offer more time to biological mothers, but none come near Netflix.

We want employees to have the flexibility and confidence to balance the needs of their growing families without worrying about work or finances. Parents can return part-time, full-time, or return and then go back out as needed. We’ll just keep paying them normally, eliminating the headache of switching to state or disability pay. Each employee gets to figure out what’s best for them and their family, and then works with their managers for coverage during their absences.

 

This is a big step for a few reasons.

Despite making headlines and a hashtag #LeadOnLeave, the Department of Labor hasn’t made much headway on getting widespread legislation to pass. Federal law says that new parents can get up to 12 weeks time off from their jobs, but that doesn’t guarantee pay and it’s only applicable for companies with more than 50 employees.

Currently, only California, New Jersey, and Rhode Island have paid parental leave at the state level, putting the U.S. outside the list of 185 countries (alongside Papua New Guinea) that do have paid maternity leave. Seventy-eight of those countries also mandated paternity leave, with 70 of those providing paid leave to new fathers, according to a report by the International Labour Organization.

Lots of comments on the Netflix blog congratulate the company for catching up with Canada, where the national employment insurance system allows workers to get at least 15 weeks of paid maternity leave and 37 weeks shared between both parents, with some cost-sharing.

That Netflix’s policy extends to new fathers could be the game changer needed to upend both the "mommy tax" and the "daddy bonus" and move both genders toward pay parity as they move through their careers.

The fact that the workplace is changing radically (see Pew’s research on "breadwinner moms" which make up 40% of American households) is in sharp contrast to a decline in the number of companies offering paid paternity leave, according to the Society for Human Resource Management. Eighty-nine percent of fathers took time off after the birth of their child but nearly two-thirds of them took a week or less, according to a recent study.

Liza Mundy, director of the Breadwinning & Caregiving Program at New America, told Fast Company in a previous interview that paternity leave doesn’t just encourage bonding between father and child but a more equitable workplace:

Paternity leave resets the division of labor in the households, gives men a chance to get involved very early on in a way that often becomes permanent, and actually frees up women to work more. It also can spread the stigma around so that women don't get singled out for being the potential problem hires or problem employees. If everybody—male or female—is asking for leave or taking leave that they already qualify for, I think it just levels the playing field for how men or women are looked at in the office.

While leveling the playing field for both women and men, Netflix is also putting stock in its staff’s ability to be accountable for themselves and their productivity. Unlike many businesses that build in boundaries such as the standard two-week vacation and regular office hours to rein in employees, Netflix sent its vacation policy packing a few years ago. The unlimited parental leave policy furthers a culture of self-regulation:

Netflix’s continued success hinges on us competing for and keeping the most talented individuals in their field. Experience shows people perform better at work when they’re not worrying about home. This new policy, combined with our unlimited time off, allows employees to be supported during the changes in their lives and return to work more focused and dedicated.

How has this played out so far? Netflix gets pretty good reviews from both existing and former employees, according to Glassdoor’s anonymous ratings platform. Sixty-six percent would recommend working there to a friend and CEO Reed Hastings has an 80% approval rating among the 350 staffers who weighed in.

On the business front, Netflix has over 60 million subscribers worldwide, adding 4.9 million in the first quarter of this year alone. Sales were up 24% to $1.57 billion and shares gained 40% even though profits fell slightly.

Offering paid leave for up to a year to new parents could only help solidify employee loyalty to the company as it grows. Indeed, a report from the Center for Women and Work at Rutgers University found that women who reported taking paid leave are more likely to be working nine to 12 months after a child’s birth than those who take no leave.

A mother’s future earnings increased by 7% every month the father takes off, according to the Institute for Labor Market Policy in Sweden. The impact on the American economy is also worth noting. Economists say that if American women worked at the same rates men did, the U.S. GDP would grow by 9%. With its parental leave policy, Netflix is betting that backing parents will boost the economy, as well as its own bottom line.

UPDATE: In a report by the New Yorker, a Netflix spokesperson clarified that the policy only affected employees of its streaming business. An earlier version of this story said it would affect all employees, per the company's blog post.