The Business Case for Giving ALL Workers Paid Time Off

Paid time off?(PTO) is an employer-provided benefit that grants employees compensation for personal time off,?vacation days, federal holidays, sick?leave, and maternity and paternity leave. Currently, PTO?policies are not a requirement of the Fair Labor Standards Act (FLSA). Yet over the past half-century, the share of moms who are working either full or part-time has increased from 51% to 72%, and almost half of two-parent families now include two full-time working parents. Given this trend and the recent developments around COVID-19, now more than ever it’s clear that ALL workers should have access to paid time off (among other benefits).

A brief history of paid leave in the U.S.

The U.S. has historically lagged behind most countries with regard to family leave benefits. It wasn’t until 1993 that the Family and Medical Leave Act (FMLA) was passed, which granted some employees up to 12 weeks of unpaid time off. More than 28 years later, not much progress has been made—only 20% of private-sector workers have access to paid family leave. However, the Federal Employee Paid Leave Act recently went into effect, providing around 2 million federal employees with 12 weeks of paid parental leave. The Family and Medical Insurance Leave (FAMILY) Act was also reintroduced, which would grant workers up to 12 weeks of paid family leave.?

COVID-19 is one reason why paid leave has been brought to the forefront of the national conversation. In January, President Biden unveiled the American Rescue Plan, which calls for employers to increase leave and expand coverage to include first responders. Meanwhile, companies like Target are offering free transportation and pay for the time taken to receive the COVID-19 vaccine. And, a lack of paid leave coupled with the 153% increase in women’s unpaid labor during the pandemic has caused nearly 3 million women to drop out of the labor force in the past year—a huge setback for gender equality.

While COVID-19 has certainly introduced new considerations around paid leave, people’s desire for this key benefit has remained consistent. Year-over-year, workers say the #1 benefit they want is paid time off, closely followed by paid family leave. However, even though 76% of employees receive paid vacation time, few employers provide paid maternity leave (55%), paternity leave (45%), or extended family care leave (35%). The biggest obstacle is cost—it’s estimated that a comprehensive national paid leave program would cost between $21.5 to $43 billion annually. Regardless, 75% of businesses say they support a government leave plan to help families cope with future public health and economic crises.

Both employees and employers benefit from paid time off

For employees, paid time off is an important part of balancing their professional and personal life. It allows them to take breaks from work—whether vacations or ‘staycations’—which helps them avoid burnout. This is especially important right now: due to the pandemic, many people are working additional hours, dealing with mental health issues, or struggling to find a work-life balance. But despite the benefits of taking a break from work, 55% of American workers don’t use their vacation time. This amounts to 768 million vacation days that go unused every year.

Offering paid time off also lets employees attend to their personal obligations, from doctors’ appointments to home improvement projects. Or employees may simply need time to recuperate from an injury or illness (like COVID-19). When they can’t take time off to recover, the quality of their work suffers and they’re more likely to spread their illness to colleagues and customers. For women, paid leave helps them remain in the workforce throughout their careers. Access to paid leave is estimated to increase mothers’ labor force participation by approximately 20% during the first year following their child’s birth, an increase that remains significant up to five years later. New mothers who take paid leave are also 54% more likely to report wage increases.

For employers, offering paid time off provides several benefits. It allows them to reduce unscheduled absences and better plan for coverage because employees can schedule days off in advance rather than calling in sick. In fact, employers who offer PTO see a 6% to 8% decrease in employees who miss work without giving notice. Providing paid leave can also boost employees’ physical and mental health, attitudes toward work, and productivity, all of which benefit the business.

In addition, PTO is a key component of the employee value proposition, especially for women. Over half (58%) of employers say that offering paid leave helps them attract talent. However, it’s also about retention—employees are more likely to stay with their company when their needs are met and they feel valued. With the average cost of hiring a new employee approximately $4,000, it’s much more financially advisable to pay for time off versus risk losing a team member.

The U.S. is lagging, but some states are setting an example

While the benefits of paid time off are clear, the U.S. is the only country among 41 nations that does not mandate any paid parental leave. In Brazil, Spain, Austria, and many other countries, employees are entitled to 30 days' leave, typically after some period of employment. One state paving the way is California, which allows for six weeks of parental or family leave and up to 52 weeks for personal medical needs. The program has increased the average income of new mothers by $3,407 and reduced their risk of dropping below the poverty line by 10.2%. Under the program, the labor force participation of caregivers also increased. And the vast majority of California employers reported positive or neutral effects on employee productivity (89%) and profitability/performance (91%).

Providing paid time off builds a healthier workforce

Despite decades of slow progress, COVID-19 is reigniting the discussion around paid leave for lawmakers and employers alike. Companies know that the benefits of giving workers PTO far outweigh the costs, and employee sentiments haven’t changed—paid time off is consistently the #1 most desired benefit. So, if you expect your workers to put in more hours, especially during the pandemic, then recognize that they will need time off. And acknowledge that in order to create a healthier and more human-centric workplace, you have to give employees a break so that they can be fulfilled in all aspects of their personal and professional lives. It’s simply the right thing to do.

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