How to Create a Parental Leave Policy That's Fair and Affordable

A well-thought-out parental leave policy attracts and keeps top talent. Learn how to create a fair, affordable parental leave policy in this guide.

Stefana Zaric
Written by Stefana Zaric
March 3, 2022
Contents
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Parental leave is time an employee can take off when they or their partner gives birth, adopt a child, or become foster parents. For some families, a great parental leave policy is necessary to start a family without significant stress and financial uncertainty.

Parental leave is not a mandatory benefit in all countries, and policies vary between geographic location, company, and employer. For instance, Scandinavian countries are known for offering pretty generous parental leave. 

The US is the only developed and wealthy country in the world without a statutory paid parental leave policy. However, many American citizens receive twelve weeks of unpaid leave under the Family and Medical Leave Act. FMLA eligibility is for full-time employees (regardless of gender) who have worked 1,250 hours for an employee. 


A parental leave policy is one of the most important not-mandatory benefits to attract and retain top talent. Below, we share what parental leave includes, how to create one, and answer frequently asked questions about parental leave.

What does a standard parental leave policy include?

A standard parental leave policy should be concise yet detailed. It should explain exactly how your company can support employees should they introduce a new child to the family. Specifically, it should contain: 

  • An introductory statement familiarizing employees with your parental leave policy
  • Eligibility requirements an employee must meet to take advantage of parental leave
  • Specific benefits you offer to support an employee during parental leave
  • Information about whether they receive company and government support at the same time 
  • A communication plan explaining how you’ll keep in touch with an employee on leave to make the return-to-work transition easier
  • A 'How to Apply 'section helps an employee go through the application process as smoothly as possible
  • Your company's position on an employee progression and remuneration while on leave
  • Support you'll provide to a staff member once they go back to work

Promote it internally and externally because a well-thought-out parental leave policy is a powerful tool for attracting and keeping top talent.

How to create a parental leave policy

Parental leave policies vary from one company to another, but the steps to create them differ little. Here's how to approach the creation process:

Consult your staff

You want to know your employees' take on parental leave to offer the best-fit policy. Pew Research Center finds 82% of Americans support paid maternity leave, while 69% say fathers should have paid paternity leave. 

Also, 27% of respondents think paid family leave is a benefit that would help them most. Interestingly, paid family leave is about as popular a non-mandatory benefit as flexible working. 

One way to gather opinions and ideas about what will make your employees' parental leave easier is through anonymous surveys. Depending on the size of your staff, you could talk to each employee individually for a deeper conversation.

Once you collect all the information, you can incorporate your findings into a policy that balances their needs and your budget.

Determine what you can offer

Be realistic about what you can offer new parents. Not all companies are in the same position, and you need to deliver on every promise you make. 

First, evaluate your budget and establish parental leave costs. These include the salary and benefits you'll pay to an employee on leave, as well as the temporary worker compensation (if necessary). 

Remember, parental leave is an investment as much as a cost. SHRM determined the cost of replacing an employee is around one-third of the worker’s annual salary. In other words, the cost of losing an employee because of a poor (or non-existent) parental leave benefit could be far more than the cost of parental leave itself.

Define (inclusive) eligibility requirements 

For many people, parental leave is synonymous with maternity leave (rarely paternity leave).  However, creating an inclusive parental leave policy enables both parents to be involved in childcare and shows you stand for gender equality. 

In your parental leave policy, be clear about the eligibility requirements qualifying an employee as a parent. Describe when employees can take advantage of leave and when parental leave does not apply.

Consider adding the following definitions to your company policy and clarifying whether leave applies to each:

  • Biological mother/father
  • Same-sex partner
  • Gender-neutral partner
  • Primary caregiver
  • Foster parents
  • Adoptive parents

 In addition, establish how the benefits you offer vary by situation, not just by gender. For instance, step-parents can add a stepchild to their health insurance in some companies, but they are not eligible to take paid parental leave. 

Monitor state's rules and regulations

The best way to ensure you comply with your country's or state's parental leave laws and stay competitive is to use your state’s specific rules and regulations as a starting point. Knowing what legal requirements you must meet makes it much easier for you and your human resource department to create an inclusive and sustainable parental leave policy. 

Start by listing the government-mandated benefits and building a policy around them. For example, in New York, both full and part-time employees working for a private employer are eligible for paid family leave

Check out the National Conference of State Legislator’s resource to learn more about your state's family leave laws

Rely on data when presenting a parental leave policy to stakeholders 

Company stakeholders respond to hard numbers because they must justify every cost, including paid parental leave. When you pitch parental leave, come prepared.

As a starting point, refer to the Center on Budget and Policy Priorities article stating that paid time off for parents actually boosts productivity and retention over unpaid parental leave benefits. Also, if you’re coming up with an employee benefit policy from scratch, use our guide to calculate employee benefits and explain how a strong benefits package ultimately saves costs. 

Craft a policy proposal and send it to leadership for revision and approval

Ensure the first draft includes as many details as possible, including the list of employee benefits you plan to offer. 

Define your leave period, meaning how many weeks of paid parental leave eligible employees receive. Also, clarify whether a team member must exhaust other paid leaves, such as sick leave and vacation, before failing a parental leave request. 

Discuss whether the policy applies equally to remote workers as well as onsite workers–we believe they should, by the way. Also, add a section specifying how your policy will run concurrently with the FMLA’s requirement for at least 12 weeks of unpaid leave. 

Update your parental leave policy regularly

Rules surrounding parental leave policies sometimes change (such as 2021’s Build Back Better Act). Also, the laws you must comply with vary by the number of employees so you may need to revise your policy as your company grows. 

For example, if you have 15 or more employees, you must comply with The Pregnancy Discrimination Act of 1978, prohibiting employers from treating employees differently if they are pregnant. 

However, if your team grows and you come to 50+ employees, you must comply with FMLA. 

Keep your parental leave policy updated and compliant with the law, ensuring everything affecting employee leave entitlement, especially when the birth of a child is a reason an employee asks for time off, is covered.

And if you choose to hire international employees, you’ll need to comply with that country’s parental leave requirements, too. (Don’t worry, we’ve got you covered down below.)

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Parental leave policy requirements around the world

Countries worldwide each have unique parental leave policies. Use them as inspiration for your own policy or, if you hire an employee in a new country, be sure to comply with their parental leave laws. Check out our global hiring guide to learn about specific requirements in any country around the world.

Iceland has a parental leave law many countries could look up to

Parents in Iceland are entitled to a year of paid time off (six months each for two parents). Parents may split the remaining leave period as they find most convenient, but fathers in Iceland end up using around 50% of the parental leave benefits. 

Germany parental leave laws promote gender equality

In the past, women in Germany were expected to stay at home once the newborn arrived. However, in the mid-2000, society and law encouraged women to return to work and men to take paternity leave for biological and adopted children.

Also, employees in Germany are entitled to 67% of the average monthly income in the first 12 months of leave..

Finland and its generous parental leave culture

As of 2021, parents in Finland are offered 164 days of parental leave. In addition, each parent can transfer up to 69 days from their leave to their partner. 

Finland also offers parents a dedicated allowance until the new child is 13 weeks old. Single parents may use both parents' allowance. 

Norwegian considerable parental leave laws

Pregnant employees in Norway can take 12 weeks of leave of absence during the pregnancy. They may also take six weeks off after childbirth.

The overall parental leave period can last 49 work weeks (100% wage coverage) or 59 work weeks (80% wage coverage).

Examples of companies with progressive parental leave policies 

Some globally recognized companies differentiate themselves from competitors by offering progressive parental leave benefits. Here's how Johnson & Johnson, LinkedIn, and Netflix do it.   

Johnson & Johnson

Nursing mothers working at Johnson & Johnson can ask for a breast milk delivery service during a workday. It means the company provides breast milk transport to employees' homes. 

Also, 17 is the number of weeks parents may take for parental leave. In addition, employees gain access to various discounts and child care centers through the company. 

LinkedIn

LinkedIn supports its employees during life-changing events, such as the birth or adoption of a child. For example, the company offers $10,000 as support during the adoption process. 

LinkedIn also covers three cycles of fertility treatments and provides financial support for surrogacy-related expenses up to $20,000.

Netflix 

As of 2015, Netflix offers unlimited parental leave to all its employees. The benefit applies to the first year after the new family member arrives, whether a biological or adopted child. 

The company's leadership team offers such leave to support their team members in one of the most important moments in their lives and motivate them to go back to work with more elan.

Frequently asked questions about parental leave

Can my employer refuse parental leave?

An employer can refuse parental leave if they determine an employee doesn't meet the requirements needed for such a leave. An employer must inform an employee about their decision in writing. 

Who is entitled to parental leave?

The Family and Medical Leave Act (FMLA) protects all parents and families in the US. 

It allows mothers and fathers to take 12 weeks of unpaid leave annually for the birth or adoption of a child. Also, future mothers are entitled to FMLA leave for a pregnancy-related incapacity. 

How much of a salary is an employee entitled to while on parental leave?

It depends on the country's parental leave law. In Norway, for instance, an employee gets 100% wage coverage for 49-week parental leave. On the other hand, employees in California are entitled to 70% of the wage for eight weeks in a 12-month period.

Who pays for parental leave?

Most countries recognize three fund types covering family leave:

  • Employer liability
  • Government-provided social security
  • Mixed policies combining employer liability and social security

What is the employer's responsibility during parental leave?

Part of the employers' responsibilities will depend on government-mandated benefits employees are entitled to. Other than that, employers can create a paternal leave policy offering additional benefits to their employees. 

What are the consequences of refusing parental leave?

When a specific leave entitlement-related issue occurs, try to resolve it with an employee. Otherwise, they can file a complaint with the Workplace Relations Commission.

You can do it as well by submitting it through WRC's online form within six months of the dispute happening. 

How does an employee request parental leave?

Those planning to take parental leave must give written notice to their employees at least a month and a half before the leave is due to start. 

When writing a notice, ensure to include the following information: 

  • The date your parental leave should begin
  • How do you plan to take it 
  • The leave duration 

Once you create a document, you and your employee must sign it at least a month before the leave starts.

Offer generous parental leave benefits to attract top global talent

Building an international team can be time-consuming, especially when compliance is involved

There are different local labor laws, taxes, and mandatory employee benefits for each country to keep up with. In some countries, parental leave is required by law, but even when it's not, a good policy is undoubtedly a benefit that can help you attract the best talent out there.

With Deel, it's easy to track any employee benefits and time off. Want to learn how it all works? Book a demo today to find out.

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