How to Create a Parental Leave Policy That's Fair and Affordable [With Template]
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A parental leave policy is one of the most impactful non-mandatory benefits you can offer to attract and retain top talent. Almost eight out of ten employees with benefits say access to parental leave influenced their choice of employer.
Parental leave is the time an employee takes off work when they or their partner gives birth, adopts a child, or becomes a foster parent. For some families, a great parental leave policy is necessary to start a family without significant stress and financial uncertainty. Parental leave is not a mandatory benefit in all countries, and policies vary between geographic location, company, and employer.
This article walks you through how to develop a fair and affordable parental leave policy, what to include in your policy, and legal requirements to be aware of.
What does a standard parental leave policy include?
A standard parental leave policy should be concise yet detailed. It should explain exactly how your company can support employees should they introduce a new child to the family. Specifically, it should contain:
- An introductory statement familiarizing employees with your parental leave program
- Eligibility requirements an employee must meet to receive parental leave
- Specific benefits you offer to support an employee during parental leave
- Information about whether they receive company and government support at the same time
- A communication plan explaining how you’ll keep in touch with an employee on leave to make the return-to-work transition easier
- A 'How to Apply’ section that explains the application process
- Your company’s position on employee progression and remuneration while on leave
- Support for staff members once they return to work
A well-thought-out parental leave policy is a powerful tool for attracting and retaining top talent, so promote yours internally and externally.
7 steps to creating a parental leave policy
Parental leave policies vary from one company to another, but the steps to creating a policy are fairly standard:
1. Consult your staff
You want to know employees’ take on parental leave to offer the best-fit policy. Pew Research Center finds 82% of Americans support paid maternity leave, while 69% say fathers should have paid paternity leave.
Also, 27% of respondents think paid family leave is a benefit that would help them most. Interestingly, paid family leave and flexible working are equally popular non-mandatory benefits.
One way to gather opinions and ideas about what will make employees’ parental leave easier is through anonymous surveys. Depending on the size of your staff, you could talk to each employee individually for a deeper conversation.
Once you collect the information, incorporate the findings into a policy that balances their needs and your budget.
2. Determine what you can offer
Be realistic about what you can offer new parents. Not all companies are in the same position, and you need to deliver on every promise you make.
First, evaluate your budget and establish parental leave costs. These include the salary and benefits you’ll pay to an employee on leave, as well as temporary worker compensation (if necessary).
Remember, parental leave is an investment as much as a cost. SHRM determined the cost of replacing an employee is around one-third of the worker’s annual salary. In other words, the cost of losing an employee because of a poor (or non-existent) parental leave benefit could be far more than the cost of parental leave itself.
3. Define (inclusive) eligibility requirements
For many people, parental leave is synonymous with maternity leave (rarely paternity leave). However, creating an inclusive parental leave policy that enables both parents to be involved in childcare shows you support gender equality.
In your parental leave policy, be clear about the eligibility requirements qualifying an employee as a parent. Describe when employees can take advantage of leave and when parental leave does not apply.
Consider adding the following definitions to your company policy and clarifying whether leave applies to each:
- Biological mother/father
- Same-sex partner
- Gender-neutral partner
- Primary caregiver
- Foster parents
- Adoptive parents
In addition, establish how the benefits you offer vary by situation, not just by gender. For instance, step-parents can add a step-child to their health insurance in some companies, but they are not eligible to take paid parental leave.
4. Monitor local rules and regulations
Use your region’s specific rules and regulations as a starting point for developing your policy. Knowing what legal requirements you must meet makes it much easier for you and your human resource department to create an inclusive and sustainable parental leave policy.
Start by listing the government-mandated benefits and build a policy around them. For example, in New York, both full and part-time employees working for a private employer are eligible for paid family leave.
US-based employers can refer to the National Conference of State Legislators to learn more about each state’s family leave laws.
5. Rely on data when presenting a parental leave policy to stakeholders
Company stakeholders respond to hard numbers because they must justify every cost, including paid parental leave. When you pitch parental leave, come prepared.
As a starting point, refer to the Center on Budget and Policy Priorities article stating that paid time off (PTO) for parents actually boosts productivity and retention over unpaid parental leave benefits. If you’re developing a brand new employee benefits policy, use our guide to calculate employee benefits and explain how a strong benefits package ultimately saves costs.
6. Craft a policy proposal and send it to leadership for revision and approval
Ensure the first draft includes as many details as possible, including the list of employee benefits you plan to offer.
Define your leave period, meaning how many weeks of paid parental leave eligible employees receive. Also, clarify whether a team member must exhaust other paid leaves, such as sick leave and vacation, before failing a parental leave request.
Discuss whether the policy applies equally to remote workers as well as on-site workers. If you’re in the US, add a section specifying how your policy will run concurrently with the Family and Medical Leave Act (FMLA) requirements of at least 12 weeks of unpaid leave.
7. Update your parental leave policy regularly
Rules surrounding parental leave policies sometimes change (such as 2021’s Build Back Better Act in the US). Also, the state laws you must comply with vary by the number of employees you have, so you may need to revise your policy as your company grows.
For example, if US-based companies have 15 or more employees, they must comply with The Pregnancy Discrimination Act of 1978, prohibiting employers from treating employees differently if they are pregnant. However, if their team grows to 50+ employees, they must comply with FMLA.
Keep your parental leave policy updated and compliant with federal laws, ensuring everything affecting employee leave entitlement, especially when the birth of a child is a reason an employee asks for time off, is covered.
And if you choose to hire international employees, you’ll need to comply with that country’s parental leave requirements, too.
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Parental leave policy requirements around the world
Countries worldwide have unique parental leave policies, which you can use as inspiration for your own policy. If you hire an employee in a new country, be sure to comply with its parental leave laws. Check out our global hiring guide to learn about specific requirements around the world.
Parental leave in the US
The US is the only developed and wealthy country in the world without a statutory paid parental leave policy. However, many American citizens receive twelve weeks of unpaid leave under the FMLA.
FMLA protects all parents and families in the US. Eligibility is open to full-time employees (regardless of gender) who have worked 1,250 hours for an employee. It allows mothers and fathers to take 12 weeks of unpaid leave annually for the birth or adoption of a child. Also, future mothers are entitled to FMLA leave for pregnancy-related incapacity.
Iceland has a parental leave law many countries could look up to
Parents in Iceland are entitled to a year of paid time off (six months each for two parents). Parents may split the remaining leave period as they find most convenient, but fathers in Iceland typically end up using around 50% of the parental leave benefits.
Germany’s parental leave laws promote gender equality
In the past, women in Germany were expected to stay at home once the newborn arrived. However, in the mid-2000s, societal and legal changes encouraged women to return to work and men to take paternity leave for biological and adopted children.
Also, employees in Germany are entitled to 67% of the average monthly income in the first 12 months of leave.
Finland and its generous parental leave culture
As of 2021, parents in Finland are offered 164 days of parental leave. In addition, each parent can transfer up to 69 days from their leave to their partner.
Finland also offers parents a dedicated allowance until the new child is 13 weeks old. Single parents may use both parents’ allowance.
Parental leave laws in Norway
Pregnant employees in Norway can take 12 weeks of leave of absence during their pregnancy. They may also take six weeks off after childbirth.
The overall parental leave period can last 49 work weeks (100% wage coverage) or 59 work weeks (80% wage coverage).
Examples of companies with progressive parental leave policies
Some globally recognized companies differentiate themselves from competitors by offering progressive parental leave benefits. Here’s how Johnson & Johnson, LinkedIn, and Netflix do it.
Johnson & Johnson
Nursing mothers working at Johnson & Johnson can ask for a breast milk delivery service during a workday. It means the company provides breast milk transport to employees’ homes.
Parents may take 17 weeks of parental leave. In addition, employees gain access to various discounts and childcare centers through the company.
LinkedIn supports its employees in the UK during life-changing events, such as the birth or adoption of a child. For example, the company allows employees to claim back expenses during the adoption or fertility process, with a lifetime limit of £21,000 (GBP).
As of 2015, Netflix offers unlimited parental leave to all its employees. The benefit applies to the first year after the new family member arrives, whether a biological or adopted child.
The company’s leadership team offers such leave to support their team members in one of the most important moments in their lives and motivate them to go back to work with more enthusiasm.
Frequently asked questions about parental leave
Can my employer refuse parental leave?
An employer can refuse parental leave if they determine an employee doesn’t meet the requirements needed for such a leave. An employer must inform an employee about their decision in writing.
How—and how much—do you get paid while on parental leave?
It depends on the country’s parental leave laws. In Norway, for instance, an employee gets 100% wage coverage for 49-week parental leave. On the other hand, employees in California are entitled to 70% of the wage for eight weeks in a 12-month period. In Canada, parental leave benefits are paid out through the government via Employment Insurance (EI).
Who pays for parental leave?
Most countries recognize three fund types that cover family leave:
- Employer liability
- Government-provided social security
- Mixed policies combining employer liability and social security
What is the employer’s responsibility during parental leave?
Part of the employer’s responsibilities will depend on government-mandated benefits for employees. Other than that, employers can create a paternal leave policy offering additional benefits to their employees.
How does an employee request parental leave?
Those planning to take parental leave should give written notice to their employees at least a month and a half before the leave begins.
The notice should include the following information:
- Employee name, role, and department
- Contact information
- Parental leave start date
- Leave duration in weeks
- Expected return-to-work date
Create a digital parental leave request template for team members to use and store it in an accessible location, such as Google Drive or Notion. Parental leave requests are typically reviewed and approved by the HR team.
Get started with this free parental leave policy sample
When you’re building a global team, you have to keep up with different labor laws, taxes, and mandatory employee benefits for each country. In some countries, parental leave is required by law, but even when it’s not, a good policy is undoubtedly a benefit that can help attract the best talent out there.
Build a policy that works for a global team with our customizable parental leave policy template.