Paid Family Leave–What is Affordable?

Recently while reading a post on the Department of Labor’s blog from a new father employed by Microsoft, I was thrilled to learn of the birth of a healthy baby with parents fortunate enough to work for profitable employers with good benefits. Love that good news! I don’t know Matt, but as an employee of Microsoft, Matt received paid family leave. And, his wife returned to her employer (unknown company) to work part time post maternity leave. Several months after returning to the workforce part time, she decided to leave the employer to start her own business. Reportedly Microsoft’s gross earnings per employee exceed $700,000. (See: http://www.businessinsider.com/see-how-much-tech-giants-like-apple-and-google-make-per-employee-2015-10 ). So, it’s probably safe to say, that Microsoft can afford a rich benefits package.

Unfortunately, many small to mid-size businesses don’t have the profit margins or even gross revenue to afford benefits like paid family leave. I think many of us understand that most small businesses don’t even have 1/4 of the earnings per employee of Microsoft. But the issue is more complex.

It’s easy to make the case for more benefits. So for today, I’ll play devil’s advocate. Here are some challenges to consider when mandating enhanced benefits:

  •  Competing for good employees. Small business is already having a difficult time competing for good employees. The larger the total compensation package becomes at large companies, the worse the problem. In order to compete, small businesses must increase benefits/pay where they can. If they can’t grow revenue, the money has to come from another expense line item. Maybe the company spends less on training? Or, maybe the company eliminates another job/employee? Even if we mandate paid leave for larger companies only, the impact will be felt on smaller employers.
  • Large corporations squeezing money out of their vendors. Small companies often have large companies as customers. At times, the small employer is heavily reliant on a few large businesses as customers. Those same large companies continue to place pressure on their vendors to reduce prices, thereby squeezing the small employer’s margin. Whether it’s Walmart, or the construction giants, this problem is on the rise for small employers. There is nothing wrong with making a good deal. Companies continue to look for ways to improve revenue and decrease expenses. That’s part of what enables them to provide the benefits to their own employees.
  • Mandatory benefits could mean less jobs during hard times. Let’s say an employer lost a major customer or the economy dips again. In order to survive, employers start cutting costs. We all know this drill—lay-offs. If companies are subject to mandatory benefits, the choices of how to cut costs are limited, which will lead to more job elimination. In hard times, many decision-makers will look to cutting a 401(k) match and reducing insurance benefits and paid time off, allowing them to keep more people on the payroll. If we mandate rich benefit packages, this option will be off the table. During hard times, we need as many jobs as possible.

I strongly encourage employers to continue to improve their benefit packages to include more retirement benefits and paid family leave. After all, it makes my job as a recruiter so much easier!

However, other issues plague small employers when employees are out on leave. The employer generally doesn’t have the bench strength to appropriately cover the job of the absent employee. Placing a temp in the job may help reduce the burden on the remaining employees, but rarely makes up for the hole a good employee leaves. These are not excuses to fail to address the needs of employees. They are issues that need to be part of the conversation. Let’s be thoughtful about how we go about improving total compensation.

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