What Paid Family Leave Could Mean for Your Business

Paid family leave helps many people afford the time off they desperately need, but it also has a major impact on organizations. If your company currently has more than 50 employees, then you're likely already familiar with the Family Medical Leave Act (FMLA) and fall under its jurisdiction. The law guarantees certain employees up to 12 work weeks of unpaid leave each year with no threat of job loss. The problem, however, is that because it's unpaid, many people can't afford to take time off, even though they're legally allowed to.

To alleviate the financial pressure of taking unpaid time off , there's been some recent political discussion about implementing a paid family leave through a payroll deduction, and some states, including California, Rhode Island and New Jersey, have already implemented plans. New York was the latest to introduce a paid leave plan, which rolled out on January 1, 2018.

Nothing's been decided at the federal level yet, but if your state is the next one to enact a paid family leave plan, will you be ready? Here's what it might mean for your business.

Paid family leave is funded through a staff-wide payroll deduction, instead of requiring each employer to self-fund the leave. But other rules vary from state to state. In New York, for example, everyone who has worked a minimum number of hours (26 weeks for people who work 20 hours a week or more, and 175 days for people who work less than 20 hours a week), qualifies. New Jersey law, meanwhile, is unique because it doesn't offer job protection during the duration of paid leave.

Ultimately, your state's law may vary greatly from existing legislature, so pay close attention to the wording of any plans that earn approval.

With paid leave on the table, it's likely that more people will take advantage of it. For example, mothers and fathers are equally entitled to FMLA when a new baby arrives, but right now only 22 percent of fathers take advantage of it. You can expect that number to jump somewhat.

However, there is a caveat—no paid leave plan covers 100 percent of salary. New York currently covers 50 percent of salary, capping the benefit at a maximum of $652.96 per paycheck. As a result, though there may be an uptick in employees opting for a paid leave, it likely won't be drastic.

The cost to individuals under participating states' existing plans are minimal. The payroll deductions range from 0.8 percent to 1.2 percent, with various maximum caps. In New York, the maximum you'll pay is about $85 annually, while the maximum contribution in California is $960.

But what happens when the government miscalculates the amount of money needed? Could it mean increased contributions or decreased payouts? It's hasn't been a problem so far—California's law has been running for 10 years and remains solvent. Still, that doesn't mean that each state is on top of the costs. And, once a benefit is implemented, if there isn't enough money to pay out, it will be difficult to roll it back. Keep an eye on your state's payout projections to prepare for any bumps along the road.

While having a baby is one of the top reasons for paid leave, the new plan isn't just for growing families. Many of these plans have been limited strictly to parents taking care of children—for example, a sick child can also be a reason for a leave, or the placement of a foster child. In New York, however, the leave also extends to employees taking care of elderly parents or grandparents.

Paid family leave is crucial for employees, but its impact on businesses will depend on how the programs are implemented, and the makeup of your workforce. Keep your eyes and ears open, and be vocal—let your local and federal lawmakers know what will be best for businesses in your state.

Photo: Creative Commons