How the Right Employee Leave Program Can Impact Retention

Understanding the various types of employee leave and the impact that it can have on an organization can be a tall task for an employer. Aside from the compliance perspective of employee leave, there is also a strategic human performance and retention approach that organizations need to keep in mind. With 21% of the United States workforce on leave for an average of one week per year, there are many opportunities throughout the year for employers to optimize their employee relations. Traditionally, employee paid leave benefits have been comprised of vacation time, sick time, bereavement leave and holiday leave; however, a surge in less traditional types of leave are being leveraged as valuable recruiting and retention tools as employers look to set themselves apart from their competitors. Let's explore how your organization's employee leave policy could be impacting your attraction and retention efforts.

The Growing Demand for Employee Leave Packages

While an employee's cash compensation has traditionally been the most impactful aspect of their total compensation, many employees are realizing that the additional benefits provided by their employers can be just as valuable, if not more valuable, than their take-home pay. While there can be a wide range of reasons as to why employees choose to leave their current roles such as career advancement, skill development, salary increases and others, many employees are realizing the value that the full package of employee benefits can provide to them, leading some to search for better benefits elsewhere.

Some of these additional types of leave may include:

• Extended leave for growing families
• Caregiver leave for those supporting family members
• Dedicated time off for volunteer time off (VTO)

By including these types of leaves in your organization's policy, it can demonstrate that you are not only valuing the health and wellbeing of your employees directly, the organization is also demonstrating that it values giving back and supporting the communities that it serves. Non-traditional leave opportunities such as volunteer time off can provide employees an avenue to feel more fulfilled in their work by supporting local organizations and causes they care about. In fact, Double the Donation found that 79% of employees who actively used their volunteer time off reported lowered stress levels, while 93% reported improved moods in the office. The same study also reported that these individuals were 52% less likely to leave their roles, leading to a 75% increase in employee tenure at their current employer.

Coordination With Other Employee Benefits

For many employees, there are many questions surrounding how taking a leave of absence could impact their other employee benefits while they're away. It is important as an employer to be proactive in the education of these potential implications. As the most traditional form of leave available to employees, FMLA provides employees the opportunity to take job protected leave whether that leave is all at once, or in blocks of time, and ensured that their benefits such as life insurance and 401(k) contributions are provided upon their return from FMLA leave. According to the US Department of Labor, their benefits must be resumed in the same manner and at the same level as when leave began. If your organization is considering unpaid maternity leave, FMLA guarantees covered employees the right to take up to 12 weeks of unpaid leave. During this time, 401(k) contributions are made via paycheck withholding, so, if an employee is taking unpaid leave, they won’t be contributing to their 401(k) plan during that time. While this does not mean their plan will be closed, the account is still active until their return and their earnings will continue to grow tax-deferred, they just won’t be making additional contributions during the time of absence. While these regulations are applied to FMLA specifically, many employers have considered treating various other non-traditional types of leave in the same manner.

The Impact of Leave on the Employee Experience

Oftentimes, employees are already facing major life stressors before they are prompted to request a leave of absence, and a poor leave experience could leave them feeling uncertain about their future with the organization, or weary about what kind of workplace environment they may be returning to. As employees seek stability and confidence in their workplace policies pertaining to leave, employers are presented with an opportunity to minimize any additional stressors on both the employee during this time. Organizations that have crafted valuable and employee-centric employee leave policies are far more likely to develop a better reputation with job-seekers and current employees. In a recent survey from AbsenceSoft that asked employees about their leave experience with their employer upon return, 55% of employees who reported a positive leave experience also responded that they felt more motivated, and 51% had a heightened sense of loyalty to their workplace upon their return.

Navigating State Mandated Leave

For organizations with employees operating in multiple different states, keeping up with the latest state and federal laws and EEOC guidance, can be a challenge; however, the demand from employees looking for organizations that provide this leave is growing significantly. According to the Bureau of Labor Statistics, private-sector employee access to paid family leave benefits has increased from 12% in 2014 to 27% in 2023. In addition, 93% of civilian workers had access to unpaid family leave benefits in 2023. Including family leave benefits is one benefit that can play to an organization’s advantage when it comes to attracting and retaining top industry talent.

In addition to the ins and outs of each state’s law, the prevalence of remote work has introduced new complexities for employers to grapple with. Some states assert jurisdiction when an employee is working remotely across state lines, so determining the correct work state can be a challenge.

Here are some things to know when it comes to state mandated paid family leave:

1. No two states are alike.
2. Organizations must coordinate your company time off and short-term disability policies with state programs. Paid leave benefits and job protection are not necessarily coordinated in each state — or with the FMLA.
3. Use of a state-administered PFML program may leave your organization with multiple remaining compliance obligations.
4. Employers cannot have and won't want a single plan to be in compliance in all PFML states. With a single plan, an employer would have to provide employees the best benefits with the least onerous obligations required by every state program.
5. Many organizations are considering implementing paid leave for those states who have not yet required organizations to do so.

The AssuredPartners compliance team has recently released their interactive Paid Family Leave Map. Engage the map below to find out more on the status of paid family leave laws specific to individual states.

The Cost of Employee Leave to the Bottom Line

While some employers may be concerned about the impact that such employee leave policies may have on their bottom line, the impact of these programs goes much further than finance. The U.S. Bureau of Labor Statistics has reported that paid leave benefits cost an employer an average of $2.94 per hour. While the financial component is certainly a consideration of employee leave, a well-designed leave policy will be one that has minimal impact on the employer financially, administratively and operationally, as the organization is now not losing out on lost productivity and enduring additional costs associated with the hiring and training of new employees. When looking at the financial impact of paid sick leave, some estimates suggest that organizations pay an average of $6.87 weekly per worker for the leave policies; however, on average the organization gained $12.32 per worker per week of value from increased productivity and reduced turnover. Additionally, paid leave is not always employer-funded, but may be employee funded in certain states, for example through a special state payroll tax in California’s paid family leave program. As an employer, the cost of funding leave programs may not entirely be on the organization itself, as there may be public funding opportunities available to support leave programs.

Employee leave programs have drawn attention throughout the United States as more and more states consider state mandated leave regulations and as demand grows from the current labor market. When evaluating your organization's employee leave program, it is important to pay close attention to how each decision may impact the experience for the end user, and how those decisions may interact with other benefits being provided by the organization. As your organization looks to enhance the employee experience by developing valuable leave policies, reach out to your AssuredPartners team for support.