How Small Businesses Can Afford To Offer Paid Parental Leave

In recent years, a few well-capitalized companies (Google, Netflix, Facebook) have competed over who can offer the most generous parental leave. But these companies are rare; according to the Department of Labor, only 12% of private sector workers have access to paid family leave through their employers. One reason that figure is so low is that many Americans work for small businesses, and it’s assumed that small businesses can’t afford to fund time off.

Yet some small business managers and owners say that’s not so cut and dried. The finances and logistics aren’t easy, but they’re not impossible either.

First, paid parental leave is not always as pricey as advertised. The Little Gym International, a chain of children’s gyms based in Arizona, recently decided to allow both male and female employees who work at company headquarters to take six paid weeks plus six unpaid weeks after a birth or adoption. As part of this policy, the company decided not to hire temps to cover leaves; employees cover for each others’ absences.

That means there are minimal hard costs (i.e. new cash out the door). Instead, “the soft costs are going to be born by all the employees here,” says Ruk Adams, the company’s CEO and president. Since employees had requested the change in benefits, in general people have been willing to help pick up the extra work.

A Small And Infrequent Business Expense

Even if you do hire temporary replacements or pay existing hourly employees to work extra shifts, the costs may be low compared with other business expenses. Molly Moon Neitzel owns Molly Moon’s Homemade Ice Cream, a chain of seven stores in Seattle. Any employee who works at least 20 hours a week, and has worked for the company for a year, is eligible for 12 weeks of parental leave at full pay. Many of her employees work part time; covering 25 hours per week for 12 weeks at $15/hour comes out to $4,500. It’s not nothing, but in the context of the price of various other benefits, “it’s just not a big deal,” she says.

This is especially true because parental leave has a natural cost-limiting factor: People do not have babies all that often. Given how much work and expense children involve for parents, no one elects to have eight children because a company offers paid leave. Many employees may not be looking to have children at all while they work for any given business. Neitzel’s employees are generally younger, and “How many 25-year-olds in Seattle want to bring home a new baby?” she asks. It is a fairly rare event, unlike other business expenses such as servicing equipment.

Planning Ahead And Shifting Priorities

That just leaves the logistics. Fortunately, “you know a little bit ahead of time if somebody’s going to have a baby,” says Adams. So, 60-90 days ahead of time, employees requesting leave must present a plan for how much time they will take. They list their various responsibilities and give recommendations on who can cover each role.

Alex Bingham, senior vice president of operations at the Little Gym, recently took about a month of paternity leave after his son was born. He has five direct reports, and the plan was for each of them to pick up a piece of his day-to-day responsibilities (with Adams providing oversight). In theory, five people covering a 40-hour job is an additional eight hours for each, but in practice, he says, that’s not what happened. Instead, he found his team shifted priorities in his absence. “Some of the less important things, the low priority items that already existed on their lists, moved down lower,” he says. That’s not always a bad thing to figure out; plenty of companies do things just because they’ve always done things, and when someone’s out and it doesn’t get done, and nothing bad happens, “maybe that’s telling us something about how important that really was,” he says.

To be sure, not all small businesses could manage to have employees cover for each other. “You have to be operating in a manner that is at least relatively functional,” says Adams. If staffing is truly bare bones, then there is no give, but that’s going to be a problem beyond the question of parental leave. An employee can get sick, or be called for jury duty. Then what?

There can be real upsides to offering paid leave too. Neitzel says Molly Moon offers its benefits in part to make working for the company “feel like a grown-up job” that people will want to keep as they build their adult lives. Replacing an employee can cost more than $4,500 in terms of the time it takes to interview and train people. While most 25-year-old Seattle-types aren’t having babies, Neitzel has seen what happened when the company partially paid for time off as some employees recovered from surgery. “The financial impact to our business was not noticeable at all, but the impact to morale and an overall feeling of support in our company is noticeable,” she says.

Bingham says that being able to take paid leave has reminded him that “we really are a family.” He recently brought his baby boy into the office to meet everyone. “It’s meant a lot,” he says.