Parental Leave: Issues for Small Businesses to Consider

Many small business owners face a dilemma when their employees have newborn children: What kind of maternity or paternity leave, if any, should they offer them?

Legally speaking, small businesses with fewer than 50 employees are not required to provide any type of leave to new mothers or fathers, whether paid or unpaid. Such businesses are exempt from the Family and Medical Leave Act, which was passed in 1993 and guarantees qualified employees at companies with 50 or more workers up to 12 weeks of unpaid, job-protected leave to care for newborn or adopted children.

However, the issue goes beyond legalities for most small businesses. Many owners feel that offering employees the opportunity to spend time at home with newborn or adopted children is the right thing to do. Others view this as an opportunity to strengthen employee loyalty and help distinguish their firms as employee-friendly places to work.

Obviously there’s a cost involved in offering leave to new mothers and fathers, even if the leave is unpaid. Either a temporary worker will have to be hired during the employee’s absence, the work will need to be outsourced to freelancers or contractors, or other employees will have to pick up the slack. This may not cost the business in dollars and cents, but it could be costly in terms of increased burnout rates and lower morale among these employees.

Not surprisingly, very few small businesses offer any kind of paid maternity or paternity leave program. According to a survey by the Society for Human Resource Management, only 12 percent of U.S. companies with fewer than 100 employees offer paid maternity leave. And 7 percent of all companies that do offer it say they plan to reduce or eliminate the program within the next year.

Meanwhile the vast majority of employees at companies with fewer than 50 workers do take advantage of the opportunity to leave their jobs temporarily to care full time for newborn or adopted children if it is offered (whether paid or unpaid): 80 percent, according to a survey by the Families and Work Institute.

Another factor owners must consider is the chance that new parents will decide not to return to work after their leave is up. Before an employee takes paternity or maternity leave, the owner should require him or her to write a detailed list of job responsibilities, both for use by employees covering the job and by the owner should the position need to be filled if the employee does not come back.

The good news for owners of small businesses that aren’t subject to FMLA is that they can custom-design maternity and paternity leave programs that are a good fit for both the company and its employees. For example, a business might offer employees two weeks of paid leave, followed by another eight or 10 weeks of unpaid leave, and promise that their jobs will be waiting for them when they return.

Employees could choose to receive more paid time by saving up and using vacation days. In some instances, new mothers may also be able to receive short- or long-term disability payments through a company-provided health insurance plan that would replace some percentage of their full-time salary.

Don Sadler is a freelance writer and editor specializing in business and finance.