Maternity and Paternity Leave Cuts: The Impact on Employee Retention

When many of us think about inflation, we think about the impact on gas prices, our grocery bills, and other daily expenses. But behind the scenes, our employers are also facing challenges that stem from increased prices. With a potential recession on the horizon employers are looking for ways to cut-costs by reducing current areas of spend.

A new survey carried out by the Society of Human Resource Management (SHRM) shows that companies have started to cut back on costs across a range of expenses, and unfortunately, many have turned to reducing certain employee benefits in an effort to stay afloat. One area where some employers have started making cuts? Maternity and paternity leave.

Some large organizations have already taken the plunge. Hulu, for example, recently announced that it would be cutting its paid parental leave policy from 20 weeks to just 8 weeks. They cite concerns about rising inflation as the cause, just like other small to midsize firms that have announced similar changes.

Parental leave is something that has long been relied on by employees—so what impact will these cuts have on employee retention? Let’s dive into it.

SHRM survey results are in

Unfortunately, cutting leave benefits is not something new.

According to SHRM data, the same tendency of leave reduction was observed ahead of the 2008 recession. The number of companies offering maternity leave dropped from 18% in 2008 to 14% in 2009, and at the time, 7% of employers said that they had plans to reduce their maternity leave in the next 12 months.

Now, SHRM interviewed 3,000 employers in their 2022 Employee Benefits Survey to understand the outlook for benefits at a time when companies are getting back to something that resembles “business as usual”.

Here are some of the findings of the survey:

• 82% stated that employee leave was very important as a benefit, and many felt it was a benefit companies needed to offer.
• Despite understanding its importance in attracting and retaining talent, leave for new parents returned to pre-pandemic levels after experiencing a rise during the pandemic.
• The number of organizations that offer paid maternity leave has dropped from 53% in 2020 to 35%.
• The number of organizations that offer paid paternity leave has dropped from 44% in 2020 to 27%.
• The number of organizations offering paid leave in the case of adoption dropped from 36% in 2020 to 28%.
• The number of organizations offering paid leave in the case of foster children dropped from 28% in 2020 to 22%.

Now that companies move back to normal operations, it seems that employers want to return to pre-pandemic levels of benefits rather than keeping the more generous leave offerings that were in place during the pandemic.

The impact of cutting maternity leave

In a country where the government does not guarantee maternity leave (mothers only have the right to 12 weeks of unpaid leave according to federal law) the majority of mothers have to return to work shortly after giving birth— unless their state offers additional protections. And right now, only 11 states demand that most employers provide paid parental leave to new parents.

This can not only negatively impact a mothers' health as they recover from childbirth, but also affect the bonding process with their child.

Paternal leave is just as critical

Apart from having clear benefits for the family and the child's overall health, paternity leave can often serve as a bridge between the mother's leave and the start of daycare or school. Childcare is one of the highest costs that families have to contend with, and paternity leave can provide some much-needed financial relief.

As more and more companies start to cut back on family leave, it’s going to become harder for families to balance work and family life. Many families are being left to weigh their expenses — and many are finding that it’s actually cheaper for one parent to leave their job and watch their children full-time, rather than pay for inflated childcare prices.

According to research from Care.com, 31% of parents surveyed are considering taking on a second job, 26% are reducing hours at work, 25% are changing jobs, and 21% said they’re leaving the workforce entirely.

The United States is one of the few industrialized nations that does not have a national paid leave policy in place, meaning that it's up to employers to offer this benefit to their employees.

While cutting parental leave might be a way for companies to save on costs in the short term, in the long term, it's likely to have a negative impact on employee retention and make it harder to attract new talent, costing more money in the long run.