Is Your Parental Leave Policy Driving Away Top Talent?

March 29, 2019 6 min read

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Employee turnover is too expensive for entrepreneurs to ignore.

What small business leader has $15,000 to spare every time an employee disappears? How many have 10 hours to spend on new hire paperwork? Worse, how many can afford to wait up to two years for a new hire to reach full productivity? Turnover happens for plenty of reasons, some of them unavoidable. The truth, though, is that around 50 percent of voluntary turnover is preventable, according to research by Insightlink. Our company, Ontraport, learned that the hard way.

A few years ago, my team lost three mid- and senior-level employees. I spent weeks wondering what more we could have done to retain them before the fourth employee on his way out finally spelled it out for me: As a working parent, he needed more support. Here in Santa Barbara, Calif., childcare costs an average of $1,250 per month, or around 20 percent of the average California household’s income.

Not long after, we debuted our on-site childcare center, offering free daycare to the children of our employees. Three years later, not only do we have the best retention rate our company has ever seen, but we’ve also kept multiple top performers from leaving our team. We re-hired our senior videographer after her extended maternity leave, and our sales leader is entering his sixth year with us because of the added benefit of free childcare.

Related: Staff Turnover Is Draining Your Company

So what does a strong parental leave policy look like? Ideally, it should include five things:

1. A statement of purpose and associated metrics.

The most important part of a parental leave policy is also the one most often forgotten about: What does your company want to achieve with such a policy, and how will you know if it’s met that goal? You might want to boost employee engagement, focus on inclusion, improve retention or enhance recruiting.

Our top goals are retention and engagement, and we make no bones about that with our team. In fact, Ontraport’s HR leaders and I review our progress on those metrics each month. After looking at our recruiting projections and who we’ve lost recently, we ask whether we could tweak our policies to better align with those goals.

2. On-site childcare.

One of the biggest reasons women drop out of the workforce to have children is that the cost of childcare meets or exceeds their income. In Massachusetts, for example, the cost of care for two young children is $34,381, according to advocacy group Child Care Aware of America. For context, out-of-state tuition at the University of Massachusetts at Amherst is currently $35,599.

Although it can’t help parents put their kids through college, our on-campus childcare center is open to employees’ children aged 18 months through five years. It’s not just a daycare, either: We’ve consulted educators to create a program that includes everything children need to grow and learn, including family engagement.

3. At least three months of paid time off.

Although the federal Family and Medical Leave Act guarantees many employees up to 12 workweeks of unpaid leave each year, few working parents can afford to go three months without a paycheck. Here in California, the California Paid Family Leave law gives eligible employees up to six weeks of partial pay when they take time off work to bond with a new child.

Frankly, both laws are stuck in the ‘90s. New parents need time away, and they need to be able to afford to take it. Although it may not be feasible for many entrepreneurs, the closer you can get to Etsy’s best-in-class parental leave policy, the better: That includes 26 fully paid weeks off, for parents of either gender, regardless of whether the child is biological or adopted.

Our updated leave policy at Ontraport for the birth of a child extends the required paid leave by four weeks — making the total paid, protected leave time available come to 16 weeks.

Related: How to Support Employees Returning to the Workplace

4. Clear guidelines for contractors.

Your parental leave policy should treat independent contractors as vital members of the team — if they’re not already, they will be soon. Financial software firm Intuit estimates that by 2020, contractors will make up 43 percent of the U.S. workforce.

Whether you’re as generous with contract workers as you are with your full-time team is up to you, but remember that disparities can result in resentments. Last summer, Microsoft expanded its paid parental leave policy to provide 12 weeks off to its contractors, just like it does with its employees. Although the software giant is still implementing the change, it will require that suppliers with more than 50 employees provide up to $1,000 per week to all new parents.

Related: How to Calculate the Right Parental Leave Policy

5. A plan to re-integrate returning parents.

One of the toughest points in a parent’s career is returning to the workforce after his or her time off. Sheryl Sandberg’s “Lean In” notes that 43 percent of professional women with children leave their jobs. Not only are they pulled back home by their familial responsibilities, but they’re often pushed out by employers unwilling to invest in their return to the job.

There is, of course, no one-size-fits-all plan for parents returning to work. Instead, describe transitional options in your policy: Can you offer flextime or remote work for the first few months back? Can you pair returning colleagues with an HR staffer to get them up to speed on company changes that happened in their absence? Is there an online course they should take about changes in the industry?

Can every small business afford to offer on-site childcare and 26 paid weeks off to new parents? Of course not. But paid parental leave is increasingly part of the benefits package offered by larger companies, which entrepreneurs have to compete with. If they can’t, they’ll find themselves stuck with an even steeper price: turnover among their most senior team members.