The Economics of Paid Parental Leave

The employment litigation lawyers at Gehres Law Group, P.C. provide representation to companies and individuals in connection with alleged violations of labor law. California has some of the most stringent laws aimed at protecting workers, including laws related to employee family leave. 

Recently, Scientific America published a report on the economics of paid parental leave. According to the report, California’s paid parental leave policies demonstrate that offering paid leave can provide businesses with financial savings.

Paid Family Leave Can Save Companies Money

California passed the first comprehensive Paid Family Leave (PFL) program in the United States back in 2002. Because there are no federal laws guaranteeing paid leave, California’s program provided substantial benefit to parents which would not otherwise be mandated by any law.

California’s program provides that workers who add a new biological child, adopted child, or foster child to their family are eligible to receive up to six weeks of partial paid leave. Both fathers and mothers are entitled to this time off and leave can be taken within the first year that a child is born or is placed with the family.

California’s paid leave program for bonding with children is in addition to the medical leave that mothers can receive in order to recover from pregnancy and child birth. Parents are permitted to take the six weeks of leave either continuously or intermittently at any time during the first year of their child’s life.

To ensure that the program is operating effectively, California regularly updates the program in response to data regarding how the program is used.

In 2017, for example, the program offered payments of 55 percent of the earnings that a parent would be making while working, up to a maximum payment of $987 weekly. For 2018, the wage replacement rates increased to 60 percent of wages for most taxpayers. Employees with low wages that are close to the minimum wage will be entitled to receive 70 percent of their customary weekly wage during their six weeks of leave. The change is prompted by the fact that most low wage workers aren’t able to make use of California’s paid leave program as currently operated because they cannot afford to live on 55 percent of their wages.

California’s program has been funded by a payroll tax that is paid by employees, which is indexed to inflation. Employers do not incur any direct costs through the operation of the program and do not incur administrative costs because the program is administered through California’s state disability insurance system.

A survey of employers determined that these paid family leave policies had either a positive impact or no noticeable impact on productivity, turnover, employee performance, or employee morale. Employers did not identify abuses of the program, and small businesses were especially unlikely to report any negative effects. Furthermore, 60 percent of California employers indicated they were able to coordinate their own benefits programs with the state’s program, providing cost-savings for employers.

As Scientific American concluded: “California’s experiment showed that paid family leave generated cost savings for businesses, either due to reduced turnover or because they coordinated their own wage replacement benefits.”

Contact Employment Litigation Lawyers

Employment litigation lawyers at Gehres Law Group, P.C. can provide assistance to companies and employees in addressing legal issues arising in connection with workplace benefits, including paid family leave. Give us a call at 858-964-2314 or contact us online to find out more about the assistance we can offer.

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