How to create a generous parental & maternity leave policy as a small business

Adequate maternity leave (nowadays known more inclusively as parental leave) has always been a hallmark of good business practice: when you treat your employees like human beings, the company culture is positive, morale is high, productivity is high, and the company thrives. You can’t separate any single element from the rest and still have a sound equation. 

But understandably, small businesses that wish to offer paid parental leave often face barriers like cost, and disruption of their business operations. While some businesses want to provide generous benefits, the possibilities are not always so endless, thanks to limited resources.  

The good news: even when resources are tight, you can still offer your people great support by getting organized, and getting creative.  

Legal requirements of maternity & parental leave  

When comparing the legal requirements of maternity and parental leave in Canada and the US, it becomes evident rather quickly that the two are worlds apart. 

In Canada, pregnant women are eligible for a baseline paid maternity leave: they can receive 55% of their earnings, up to a maximum of $638 a week for 15 weeks.

Meanwhile, parental leave, which must start once a child is born, can be shared between parents and offers up to 69 weeks’ leave, but at a markedly reduced pay rate of 33%, or $383 weekly. If no more than 40 weeks is taken, the rate goes back up to 55%.  

The US on the other hand, is the only country in the ‘developed’ world and the only country in this study of 41 nations that does not mandate any paid leave for new parents. Indeed, they only allow eligible workers 12 unpaid weeks off, and that’s only thanks to the Family and Medical Leave Act, signed in 1993.

Overall, maternity leave in the US is a matter left to each individual employer. It’s treated as a benefit, so the duration and conditions of maternity or parental leave can vary from business to business and state to state. To date, nine states have mandated some sort of family or paid parental leave. 

While Canada clearly offers a more generous (or, one might say, humanitarian) legal baseline than the US, both countries have room for improvement. 

Why creating a maternity policy is important  

Because many of the working men and women who are not currently parents may at some point choose to have children, family-friendly benefits are an essential part of any organization’s value proposition. 

It’s good for business. When employees know they can return to work after their leave, they have a sense of job security and job satisfaction. Job satisfaction and employee morale are linked to increased productivity. In other words, taking care of your people is fundamental to taking care of business. 

It attracts top talent. Companies that offer paid parental leave to their employees, benefit by attracting top talent. In one study of working fathers, 90% said it would be important for an employer to offer paid parental leave if they were looking for a new job. In a competitive market, every benefit offered can make a world of difference in the caliber of employee you end up hiring. 

Increase retention. Turnover impacts your bottom line. Nearly 30% of women who work, leave the labor force within one year of having a child, and it costs an average of 21% of an employee’s base salary to replace them. But paid parental leave policies encourage employees to return to work, allowing companies to retain talent.

In states where paid parental leave policies are implemented, there has been a 20% reduction in female employees leaving their jobs within a year of having a child. That increases to 50% after five years. 

How to manage cost of paid maternity leave 

First things first—do a cost-benefit analysis. While offering maternity leave may seem costly, it may actually be even more costly not to, considering the cost of recruiting and hiring someone new when a key employee quits. Not to mention, the potential decreased retention of other employees who consider leaving as well.  

Second, don’t be afraid to get creative with your policy. Remember that some paid parental leave is better than none at all! Think combination policies, for instance:

• 15 weeks at 70% pay
• 12 weeks of part time work for full time pay
• 8 weeks of fully paid time off, and then 8 weeks of part-time work for full time pay

You might offer 10 weeks of paid parental leave with the option to take up to an additional 8 weeks unpaid but with continued health insurance coverage. Crunch the numbers and come up with a few feasible options.  

How to manage the interruption in business  

Let’s face it: in a small business, even one person being away on parental leave can have a huge impact on day-to-day operations. You may need to bring in additional contractors to reduce business disruption, or else make tough decisions about what work to put on the back-burner. 

• Plan in advance. So much business disruption can be truly minimized if you simply plan early, and well. Identify the most important deliverables, and figure out how to cover their key responsibilities. Get the employee going on leave to properly hand-off their work to whoever will be taking over. 

• Decide who will pick up the slack. As part of your advance planning, determine how the work will get divided temporarily amongst other employees and/or hired contractors. Or, you might use parental leave as an opportunity to promote more junior employees. This could provide an opportunity to accelerate the career trajectory of both, as the parent on leave could return to work and take on more senior responsibilities. If executed well, and with the input and enthusiastic consent of the person going on parental leave (you cannot force a scenario like this), it might just work out well for everyone.  

• Talk to your people; see what they’re open to. This should be part of your plan from the get-go, and not something that is decided during the parental leave. If—and only if—parents want to do some work while they’re away, create a plan. Encourage them to define a “blackout period” of six to eight weeks postpartum where they do zero work, followed by a period during which they plan to selectively do only the most critical work a few hours per week.   

Leading by example  

Bottom line: even in cases where your company is beholden to legal obligations, it’s smart to have a clear written plan in place before anyone takes maternity leave. That’s where strong policy writing comes in. Worry not, there are companies who have written great maternity leave policies before you, and you should absolutely look to them as shining examples! 

And if you still believe only larger firms are capable of pulling this off, look to Canada’s BC-based software company Thinkific Labs, Inc.. They support new moms with generous maternity and parental leave top-ups as well as extended parental leave top-ups for new dads and adoptive parents (up to 100% of an employee’s salary for 32 weeks), while also offering new parents the option to extend their paid leave into an unpaid leave. 

There’s also the Seattle-based small business success story of Molly Moon’s Homemade Ice Cream. Entrepreneur Molly Moon Neitzel has taken pride in building a company that leads the way in best labor practices. Her employees receive 12 weeks of fully paid parental leave, which, she points out, is roughly the same cost as hiring and training a replacement.  

“The financial impact to our business was not noticeable at all,” she says, “but the impact to morale and an overall feeling of support in our company is noticeable.”