How small companies can offer paid parental leave

One of the most common questions we get from HR leaders and individuals: how can my small company provide generous paid parental leave benefits?

Small companies typically cite two major challenges with offering extended (3+ months) paid parental leave: cost and business disruption.

In fact, these two issues are inter-related.

Because smaller companies are typically quite lean, it can be very disruptive when an employee goes on parental leave. Usually, these companies have to bring in additional temp support to try to reduce business disruption, or they have to make really tough decisions about what work to put on pause.

Think of it this way: if a company has five employees and two become pregnant, that’s 40% of their employee base that will be on leave welcoming a child. In contrast, larger companies typically have only about 3% — 7% of their employee base welcome a child each year.

Larger companies also generally have enough slack to spread out the work among their remaining employee base; and if they don’t have slack, it’s not a huge problem to put a small portion of their work on pause while an employee has a baby.

While it is true that it’s generally more difficult for a smaller company to offer extended paid parental leave, there are many ways for smaller companies to thrive while also supporting their employees welcoming new babies.

What follows are recommendations on how smaller companies can address the cost and business disruption of parental leave, with the goal of providing a win-win situation for the parent and the business.

Managing the cost of paid parental leave

Truly, fully analyze whether or not you can “afford” to pay someone for parental leave. Oftentimes when companies say they “can’t afford” this, they’re ignoring the real cost of not offering paid leave: the expense of a key employee quitting, the cost and time to hire and train their replacement, and the potential decreased retention of other employees who witness this experience and consider leaving as well. The cost of losing an employee can range from 50% to 200% of their annual salary. That is much more expensive than paying them for three months of parental leave.

Research government assistance and disability insurance benefits you may be able to use to subsidize paid parental leave. Check out this summary if you’re unsure about your state’s government programs.

SOME paid parental leave is better than NO paid parental leave. Some companies will offer policies like 12 weeks paid at 70%, or 16 weeks paid at 60%. Others will offer 10 weeks of paid parental leave with the option to take up to an additional 8 weeks unpaid but with continued health insurance coverage. Don't let the fact that you can't provide a fully paid four month leave stop you from considering longer-term but slightly lower-paid options. In fact, even large companies are experimenting with combination policies like three months fully paid with an option to extend for another one or two months unpaid but with continued medical benefits.

Decide how you will handle bonuses and commission. It is becoming more standard for companies to guarantee bonus and commission despite parental leave, but there are plenty of companies that do not count time on leave toward bonus and commission. This should be communicated to your employee upfront to avoid any miscommunication and future disappointment.

Managing the business disruption

Think creatively about utilizing contractor and vendor support while the parent is on leave. Yes, this is another expense on top of paying for the new parent’s leave, but many companies find that there are affordable and high impact ways to utilize contractors to minimize any business disruption while the employee is out. Companies like The Mom Project and Prowess Project are especially beneficial to provide this type of temporary contract work utilizing highly qualified individuals. You can also think creatively about how to plug any gaps. For example — increase the marketing budget for inbounds if you have a sales rep going out, or think about increasing the scope of your PR agency if you have someone from marketing going on leave.

Consider offering some PT work for FT pay. If you can’t offer at least 12 weeks of paid parental leave, consider adding in some PT work for FT pay. For example: offer 8 weeks of fully paid time off, and then 8 weeks of part-time (<20 hours) work for full time pay. If executed well, the new parent will spend those 20 hours on the most critical work (hello 80/20 principle!), thereby dramatically reducing business disruption, and it’s still a meaningful benefit to be able to work PT for FT pay.

Allow employees to split up their parental leave periods. In general, we find that splitting up a leave is slightly more challenging from the employee’s perspective as it’s hard to prep, leave, return and then do it all over again. We also find that when you split your leave into smaller segments, you’re more likely to do more work while you’re on leave. However, many parents actually prefer to split up their leave time because it allows them to plan around childcare gaps and their partner’s leave. This could also help minimize business disruption.

PLAN! We are biased (as this is exactly what we provide via our coaching program), but so much business disruption can be minimized if you simply plan early and thoroughly for someone’s absence. Focus on identifying only the most important deliverables, and figure out how to cover their key responsibilities. Adjust your goals, and let everything else go.

While we’re on the topic of planning … we see a lot of examples of the opposite of business disruption due to welcoming a new child — business ACCELERATION. Knowing someone is going to be out can be the impetus to move faster and smarter. For example: a sales rep used her due date to create urgency in a major deal, closing the deal six months ahead of expectations because the client wanted to make sure they wrapped it up before she went out. This translated to $250,000 of revenue that would not have been booked had it not been for the sales rep’s pregnancy.

Get comfortable saying no. You will have to eliminate some of the work that normally happens when the employee is at work. This is a good test: when they return, should they pick that work back up? Or did you discover that it wasn’t a good use of their time? We hear this all the time that parents return to work and realize that not doing something for three months actually didn’t impact their deliverables. This is a great realization to have — and allows you to refine and iterate on roles and responsibilities for the longterm.

Tell your clients about the parental leave. One of the biggest concerns we hear from client-facing employees at smaller companies is how they can’t just stop their work without threatening their client relationships. But actually — what we’ve seen is that most of the regular client-facing work can be put on pause during parental leave. By letting your clients know about your pregnancy early — and putting together a strong plan — you can defer the less critical client-facing work for after your return. You need to make sure that the clients are happy and supported while you are out, with a clear escalation plan, but you do not need to maintain your regular schedule and relationship. Plus, most clients are very understanding (and excited) about supporting parental leave.

Use parental leave as an opportunity to “up-level” more junior employees. This will allow you to cover for the parent on leave with internal resources, provide exciting opportunities for more junior employees, and potentially accelerate the career trajectory of both the parent on leave (who could return to work and take on more senior responsibilities now that someone else can do their regular tasks), as well as the more junior employee (who can prove that they can do a more senior role). There is, rightfully, a lot of sensitivity around this topic as many expecting parents fear being replaced — but if executed well, parental leave can be an inflection point to elevate everyone’s roles.

Prioritize “emergency backup” plans over transitioning standard, ongoing work. What things could happen while the new parent is out that would create make-or-break issues? How can you train someone to be on “backup” in case they do happen? For example: a churn threat from a major client, unexpected hiccup in a project, or anything else where the new parent is uniquely qualified to handle. Making sure that you have processes in place to handle the most important things will streamline everything else.

Remember: the new parent is also always available in case of emergency. Most new parents on parental leave have no problem with work texting them if there is a really critical ask. While the new parent likely can’t do much, they can certainly provide guidance and point the coverage team to existing resources and materials.

Some parents will actually want to do some work while on leave. This should be part of the upfront plan, not something that is decided during the parental leave, and it should be entirely up the parent if they want to do this. The employer should never require this (and if you’re not paying them for parental leave it’s actually illegal to have them do any work). If parents DO want to do some work, we encourage them to define a “blackout period” of six to eight weeks postpartum where they do no work, and then selectively plan to do only the most critical work a few hours per week after that.

Final tips

Remember the "why": Not only is paid parental leave important for personal and societal reasons - it's good for business. The companies most focused on top talent are offering more and more paid parental leave, and companies that don't provide this are losing talent.

Be creative: It's no longer just about how many fully paid parental leave weeks you can offer. Think about other ways to build in flexibility to make this experience better for your employees.

Tailor the experience to each employee: Larger companies need strict, defined policies that apply to everyone. Smaller companies have the benefit of working closely with the expecting parent to define what works for them, keeping in mind that you want to be fair to future employees and provide equivalent benefits to everyone.