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Second Shift

Why Offering Paid Maternity Leave Is Good For Business

Companies that have sweetened their paid leave policies in recent years have been rewarded beyond good feelings.

Why Offering Paid Maternity Leave Is Good For Business

[Photo: Flickr user Johannes Jander; App Photo: Good health by Mrs. Frances Jewett]

When it comes to maternity leave, not all companies see the costs and benefits in the same way.

All of the companies on Working Mother magazine’s 100 Best Companies list—released today—offer at least a few weeks of fully paid leave (an average of nine weeks, up from eight last year). Companies in the top 10 offer an average of 11 weeks. Contrast this with the U.S. private sector as a whole, where, according to Working Mother's numbers, only 26% of employers offer coverage beyond short-term disability leave. Only three states and six cities have enacted paid parental leave programs for their workers this year.

That's quite a gap. It raises the question of how these organizations perceive the economics of leave. While a better-than-average policy may land a company on a magazine’s list, is there any business benefit to be gained beyond that?

Conversations with a few companies that have increased paid leave over time suggest that sweetening leave packages is not just about warm, fuzzy feelings. To be sure, companies often change many benefits at once, meaning it's difficult to attribute outcomes to any one change. But paid leave, they report, can generate returns in two areas.

Helping With Retention

Replacing people is expensive. This is especially true for specialized, skilled work. "The number that tends to get thrown around is 150% of an individual’s salary," says Barbara Wankoff, executive director for diversity and inclusion at KPMG. If a company has gone to the trouble of hiring and training someone, avoiding voluntary turnover boosts the bottom line.

Some new mothers are 100% sure they want to stay home with their babies. Some are eager to get back to work. But many have mixed feelings. If the transition back to work after giving birth is too difficult, a mother might decide it's not worth it.

Companies with longer paid leaves recognize that there is a huge difference between an 8-week-old baby, who may be waking up multiple times per night to eat and who might not have good head control yet, and a 16- to 18-week-old baby, who has a good chance of sleeping through the night, may be starting solid foods (reducing the pressure on mom for breastfeeding), and can smile and interact with other caregivers.

Accenture, the consulting company, doubled its paid maternity leave last year, to 16 weeks. According to Stacey Jones in Accenture’s media relations department, the firm subsequently saw a nearly 40% reduction in the number of moms leaving their jobs after the birth or adoption of a child.

KPMG likewise increased its leave in 2014 from roughly eight to 10 weeks to up to 18 weeks (representing a combination of disability leave and paid parental leave). From employee surveys, Wankoff says, they knew that "if we could get people through their first year after the birth of a child, we had a much higher success rate of retaining them for the long term."

The policy is new, but in terms of retention rates, "we have seen some slight movement in the first year," she says. New parents also get access to transition counseling to help them figure out how to juggle work and life. "Our leaders and our partners really do see this as a short-term investment for long-term gain," says Wankoff. Paying an additional 10 weeks of salary, plus the cost of coaching, is much cheaper than paying the equivalent of 78 weeks in replacement costs (that's the 150% of salary figure).

Boosting Recruiting

IBM increased its paid parental leave policy recently, with new moms now getting around 14 weeks. "The ROI comes in the form of attracting the best talent in the industry, and in having an engaged workforce," says Lindsay-Rae McIntyre, IBM’s chief diversity officer.

Companies that do (or want to) hire young women find that paid weeks off is an easy number for potential hires to compare between companies. Young men increasingly care about paternity leave policies too. As McIntyre points out, "There is a lot of activity in the marketplaces around formal leave policies." If a competitor makes a move, an organization needs to be at least close to avoid awkward recruiting conversations.

Sometimes increasing leave is about changing who everyone sees as the competition. Nancy Dunn, GE’s diversity program leader, reports that the company increased paid leave to roughly 16-18 weeks in 2015 (representing a combination of disability, paid leave, and GE’s "permissive" time-off policy, which does not strictly limit vacation or sick days). This move made GE "more aligned with progressive startups in terms of what we offer," says Dunn. It is one aspect of allowing the organization to hire people away from tech companies with good leave policies (e.g. Google). "Our recruiters are really on fire," Dunn says of the change. "It's gotten them traction with experienced hires and university hires as well."

Looking At The Bigger Picture

To be sure, the number of weeks of paid maternity leave a company offers is not the whole picture of its attitude toward women. In some companies, people can take quite long unpaid leaves, and still have a job to come back to. Many new parents might accept shorter leaves if coupled with reduced schedules later on, or flexibility and the ability to work from home. There is more to raising children than getting through the baby stage.

Also, as with unlimited vacation policies, there can be a difference between policy, and what managers will accept. With leave, "if it isn't role-modeled by people in positions of influence, it won't be used," says IBM’s McIntyre. In some cases, people taking long leaves may find themselves penalized in promotion and compensation decisions for doing so.

There are ways to guard against that. At KPMG, Wankoff reports, any leave time is taken out of the denominator when figuring out people's utilization rates (which influence promotions and bonuses). Likewise, people’s relative bonus levels are protected when they take leaves.

And then there's just showing that having kids is compatible with advancement. McIntyre recently had three children in three years, gaining new responsibilities every time she came back. Says McIntyre: "I had the greatest career velocity of my IBM tenure over the course of having my children."

Related Video: How Paid Leave Benefits Everyone
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