How much does it cost a company when a typical female employee goes on maternity leave? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.
The financial cost associated with family leave is widely misunderstood, and preventing progress. In fact, paid family leave programs actually save businesses money. Yes, really. I dug deeply into this issue for my book, All In.
This is why more and more companies are starting to enact these policies. It's also why three U.S. states currently have paid family leave programs (CA, NJ, and RI) and a fourth (NY) will as well beginning in 2018.
To follow the money, see my book. (You can read the intro and chapter one for free at my website, joshlevs.com.)
Here are some key points to understand.
First, state paid family leave programs do not require businesses to pay employees while they're off. Instead, these programs are insurance funds. Employees make tiny payroll deductions, which create a statewide fund. When an employee needs leave to care for a new child, elderly parent, sick spouse, or his or herself in recovering from an illness, several weeks of partial pay are provided.
The results are fantastic for businesses. Profits and employee retention are up. Fewer people are dropping out of the workforce.
When companies have their own "maternity leave" programs, they're usually covering some pay for mothers after a birth, charged to their disability programs. So while these are referred to as "maternity leave" benefits, they're really the same benefits given to any employees who have medical reasons to be off. The corporate disability insurance kicks in and pays the employee while he or she is out -- so women in these situations are not being paid out of the company's usual coffers.
Few companies offer their own paid family leave programs. When they do, they are using their money to offer some paid time off for employees in certain situations. Why would they do that? Because it also saves them money.
Across the U.S., more and women and men are leaving jobs that don't allow them adequate time with their families. Research from EY found that American men are even more likely than women to switch jobs or entire careers for greater work-life balance. It can cost up to 200% of annual salary to replace an employee, according to the Society for Human Resource Management.
Family leave programs, meanwhile, are proven to attract and retain high-quality employees. It also leaves them happier, more satisfied, and therefore more productive. And helps build them as brand ambassadors.
Companies benefit. And they're starting to learn this.
Still, some businesses simply can't afford to offer any paid leave. We need national paid family leave, modeled after the successful state programs, to help families and businesses.
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