Busting the Biggest Myth About Proposed Paid Leave Laws

version of this article appeared on the Oregon Business Magazine website on April 11, 2017.

The words “mandated paid family leave” tend to cause a mild panic in the hearts, minds and pocket books of small business owners.

“We can’t afford this! We’ll have to lay people off! We’ll go under!”

It’s an understandable fear, especially when you see the flashy headlines about the paid leave offerings of big tech firms. Thankfully, it’s also an unnecessary fear, once you understand the types of proposals being considered at the state and federal level.

As an Oregon based small business owner myself, I know how difficult it can be to hear about yet another law that might take away my choice as a business owner or constrict me in some way, but a “paid leave mandate” is not as heavy of a burden as it sounds.

What is being proposed in Salem and D.C. is simply an insurance program to help fund OFLA/FMLA to take the burden off of small-business by distributing the cost more broadly.

Policy leaders on this issue know that if the costs of paid leave fall solely on the shoulders of small businesses it will not be a sustainable solution. Current proposals center around an insurance plan model, where both employees and employers pay in a small amount (about the cost of a cup of coffee per week) to cover the cost of paid leave.

This model already has a multi-year proven track record in three states: California, New Jersey and Rhode Island (and was recently adopted by DC and New York as well).

In a survey of California employers, where a paid leave insurance program has been in place for 14 years, over ninety percent reported either a positive or neutral effect on profitability and performance (91 percent), turnover (93 percent), and morale (99 percent).

At the federal level, the FAMILY Act was reintroduced to congress this year.

The FAMILY Act is an insurance program intended to fund FMLA and would provide up to twelve weeks of paid leave (at 66% of salary) for birth, adoption or a serious medical issues for the employee or immediate family member.

The cost to employers and employees would be minimal: just two cents for every ten dollar earned.

Of course, there’s a hitch.

In the current national political climate, the FAMILY Act has little chance of passing. But this creates an opportunity for Oregon to move into a leadership position on paid leave and help define what a national solution will look like in the future.

The Paid Family and Medical Leave Insurance (FAMLI) Act was introduced in Salem as House Bill 3087 in March of 2017 and was modeled on the successful programs in California, New Jersey and Rhode Island. While it didn’t pass this session, there are high hopes for the bill in early 2018.

If passed, this program would be managed by Oregon’s Department of Consumer & Business Services. Employees and employers will each contribute up to 0.5% (half of one percent) of an employee’s wages through a regular payroll deduction and qualifying employee would get a partial wage replacement during leave.

Oregon employers of all sizes stand to benefit from such a law, as studies have shown they can provide a cost savings in reduced turnover, increase productivity and morale, attract talent, reinforce company values, and even enhance brand equity.

According to the Center for American Progress, the cost of replacing an employee can run from half to two times the annual salary for that position, and a survey conducted in 2012 showed that 3 in 4 voters “would be likely to face significant financial hardships” in the event they had to take time off for the birth of a child or illness of a loved one.

We all stand to benefit when families can keep afloat when welcoming a child or caring for a sick loved one.

So, what should small businesses be doing right now? First, I recommend small business owners get involved with a local legislative advocacy organization, like Family Forward in Oregon who is tackling this issue, or a group working on your behalf, such as the SBA or The Main Street Alliance.

There are two reasons to do this: 1) because it is likely paid leave, in some form, will be enacted sooner or later and it would be wise to get your voice included in this conversation and 2) because, until there is an insurance program in place, small business owners will be impacted by family leave in a way that large companies aren’t.

It’s difficult for small businesses to compete for talent with big tech firms like Netflix and Google who offer generous parental leave offerings, but a national insurance program to fund FMLA would help level the playing field among small and mid-size companies.

In the meantime, to keep ahead of the curve, it’s worth exploring what paid family leave benefits your small business can offer on your own, if any. Providing paid leave support can be surprisingly affordable, especially when you factor in the savings on turnover costs.

Locally, small companies like PAE Engineers and Bora Architects are blazing the trail. Their thoughts on the business case are instructive to any small- to mid-size employer considering a paid leave benefit.

If you can’t afford paid family and parental leave at the moment, there are other ways you can support your employees and gain some of the cultural benefits of a paid leave policy. Start by asking them what would be helpful.

They’re sure to have thoughts about what’s working, what isn’t, what they really want and what they are willing to give to make it happen. Including your employees in the decision making process will go a long way to creating a family friendly culture and bring you the benefits you want.

We have an opportunity in Oregon to harness our pioneering spirit and use our business voices and business examples to help lead the rest of this country as we begin to make the culture shift towards supported paid family leave.

I encourage you to help define what that shift looks like, rather than squandering this opportunity by waiting to be told what it looks like.

For those companies already offering paid leave I’d love to hear your stories, and for those who are opposed to an insurance program like this, I look forward to hearing from you as well.

The more we can learn from each other, the better the chance we can craft something that works for all of us.


Leave a Reply