The business of Paid Parental Leaves
As per the recent Periodic Labour Force Survey (PLFS) 2019–20, by National Statistical Office, the Female Labour Force Participation Rate (FLFPR) in India in 2019–20 is 30%, for men this is 77%. This is significantly lower than the neighbouring countries like Sri Lanka (33.7% as of 2019) and other East Asian countries. This deficit cuts off an estimated ~2.5 percentage points from the country’s GDP every year. The social fabric of the country can explain this gender gap amongst other reasons such as access to education, age of marriage, risk of workplace exploitation and wage disparity. Per a study conducted by the Genpact Centre for Women’s Leadership, 50% of working women in the country leave their jobs to take care of their children at the age of 30.
I’d like to look at this from the business mindset that the corporates face.
The Problem Space
In 2017, an amendment to the Maternity Benefit Act, 1961 expanded the ambit of the maternity leave from 12 weeks to 26 weeks. This change was cautiously welcomed by the corporates. This is largely due to the trade-off that these firms face between the cost of paid maternity leave to the profitability of the firm. As for the smaller companies; SMEs and startups, they would rather hire more men as they run on thin bottom lines and are not in a standing to be able to absorb these costs.
As if, the problems faced by new mothers were not enough, let us delve into another dimension of this maternity leave clause. The amendment does not include the paternity leave that the new fathers would need. This is also one more reason as to why women have to drop out of their professional career — a lack of support from the fathers. The millennials, especially, are a generation who respect the choices of their partner and are trying to bring about a change in the social norms of the country. They understand how having a child is a shared responsibility and how the professional career of the mother is as important as the father, regardless of who brings home more money. However, few laws support this. A 2016 Deloitte Survey tells us how 54% of the respondents feel “that their colleagues would judge a man more than a woman for taking the same amount of parental leave.” There is a need to address this problem.
The Solution Space
Proposing the business case for paid parental leaves. Many big firms have already embraced paid parental leaves and the results are rather positive.
1. It encourages employee retention. When Google expanded its paid parental leave policy from 12 to 18 weeks in 2007, the retention rate of women post-maternity leave increased by 50%. According to one study, women who take paid leave are 93% more likely to be in the workforce 9 to 12 months after a child’s birth than women who take no leave. The cost to replace an employee is 21% of his/her salary.
2. It boosts the morale of employees. A 2016 EY study shows that more than 80% of companies that offer paid family leave reported a positive impact on employee morale, and more than 70% reported an increase in employee productivity.
3. The more intangible benefits include attracting good talent. Deloitte’s survey reveals that 77% of workers with access to benefits reported that the amount of paid parental leave had some influence on their choice of one employer over another.
Business is not just about increasing the bottom line, it is also about sustaining that growth and doing right by the society while earning their trust. The paid parental leaves policy may help them inch closer to this long term aim.