Benefits and Compensation, HR Management & Compliance

How Does Paid Leave Help Employers?

Paid leave can be any type of leave that an employer offers to employees with pay. It includes things like sick days and vacation days, but most of the time when we’re discussing “paid leave,” the context is leave that goes beyond the standard paid time off (PTO) plan.

Family and Medical Leave Act (FMLA) leave is a classic type of leave often thought of in this regard—but it’s unpaid, leaving employers to fill in the gap with their own paid leave policies. Paid leave policies don’t typically cover all of an employee’s wages but instead cover a percentage of their previous wage, with an upper limit to the total payment each week or month.

Here are some examples of when an employee may benefit from paid leave beyond PTO:

  • To care for a sick loved one without fearing losing their job or losing their ability to maintain their home/family finances
  • Maternity/paternity leave
  • Nonwork injury recovery time (a work injury would likely already be covered under workers’ compensation leave)
  • Illness or surgery recovery

Clearly, some of these items would normally fall under the FMLA, but as we noted above, the FMLA is not paid time. Offering paid leave to employees, of course, represents a cost for businesses, but it can have a lot of benefits to the employer that more than make up for that cost. Let’s take a look at some of those benefits.

How Does Paid Leave Help Employers?

  • Improves employee retention. Employees are less likely to have to resign when facing a medical emergency or other need for paid leave if they know they will be able to have support to get through it in the form of paid leave and a culture that supports taking it. This reduces the costs associated with turnover, and it allows employers to keep key employees.
  • Can be used as a recruitment tool. Prospective employees who know this is a benefit may be more likely to accept a job offer.
  • Offers peace of mind for employees, which can lower employee stress levels and improve productivity.
  • Increases the number of employees who return to work after an absence. Employers may find that some employees who need to take FMLA or other unpaid leave never end up returning—or return and leave shortly thereafter. This can be because they’re faced with the prospect of having to return to work before they’re ready (due to financial constraints) and then being unable or unwilling to stay on at that early stage. If they’re better supported when away, they’re able to come back at a more appropriate time and remain in the workforce.
  • May improve employee engagement. Employees are more likely to feel engaged and supported by an organization that will support them when they need it. This can improve the employee morale and even productivity.

Some states have already implemented mandatory paid leave programs, typically set up through statewide payroll deductions (for funding), which takes the burden off individual employers. California, Rhode Island, and New Jersey have implemented such systems in recent years, and New York’s system just took effect this year (2018). Each state sets their own guidelines in terms of the payroll deduction amount, the percentage of salary covered (and the cap on that amount), and the allowable uses of the leave. This trend is something for employers to be aware of, regardless of whether they individually offer something similar.