The Case for Offering Paid Leave: Benefits to the Employer, Employee, and Society

Abstract

The COVID-19 pandemic has highlighted numerous problems in the labor market in the U.S., including high and low unemployment rates, burnout of employees in many industries, and inadequate time off for caregiving and medical issues. In this manuscript, we propose that employer-sponsored paid leave is increasingly important given that the U.S. lags behind most other nations in its leave policies, and many employees, particularly those in lower-wage, part-time, or front-line occupations do not have paid leave from their employers. We first discuss the common types of paid leave. Then, we make the case that paid leave is advantageous for both employees and employers, as well as society. We conclude with specific recommendations on how to implement paid leave in organizations.

In recent years, there has been tremendous volatility in the U.S. labor market (e.g., civilian unemployment hit a high of 14.7% in April of 2020, and a low of 3.5% in March of 2022; Bureau of Labor Statistics, 2022a). The low unemployment rate is driving up wages, with salary increase budgets projected to be nearly 4% in 2022 (Miller, 2021). The tight labor market is expected to persist, and although salary increases will continue to be an important component of an effective human resources (HR) strategy, employers will need to explore more creative ways to attract and retain employees. During 2021 and 2022, much attention has been paid to the so-called “Great Resignation” in which millions of American employees quit their jobs for reasons such as salary, workloads, burnout, disrespect, and lack of advancement, among others (Cook, 2021; Parker & Horowitz, 2022). Importantly, a Pew Research Center study of workers who quit in 2021 indicated that childcare issues (48%), lack of flexibility in hours (45%), and poor benefits (43%) were major or minor reasons for quitting (Parker & Horowitz, 2022). Clearly, although pay may be an important reason for turnover, other reasons dealing with benefits, particularly work-life balance, play a significant role.

To address this issue, employers should focus greater attention on paid leave, in which an employer fully or partially funds employees’ time away from work (e.g., vacation time, sick leave, and family/personal leave), as a way to attract and retain employees. Concerns about benefits may be elevated due to the COVID-19 pandemic, as employees have had to worry about themselves or their family members (e.g., children or elders) becoming ill, and then having to choose between taking time off or retaining one’s job (Goodman et al., 2019; Sterling & Allan, 2021). Thus, as COVID-19 has directly affected large portions of the population, it has become clear that leave is needed—specifically, employees need sick leave for their own illnesses, family leave to care for their family members with illnesses, and vacation leave to reduce the effects of burnout. Moreover, such leave needs to be paid, as many employees (especially lower-level, often essential workers) cannot afford to take unpaid time off (see Kossek & Lautsch, 2018). However, even in normal, pre-pandemic times, employees have needed paid leave.

We propose that paid leave is necessary for employees and can be an important component of an employer’s HR strategy for attracting and retaining talent, as well as a useful part of a diversity/equity/inclusion (DEI) focus. In the sections that follow, we first provide a brief overview of the most common forms of paid leave. We then discuss why paid leave is important for employers to offer as it is not mandated by the U.S. government, and whereas other family-friendly workplace benefits are helpful, paid leave is still necessary. This is followed by an overview of the advantages and disadvantages of paid leave for both employers and employees, as well as the advantages and disadvantages of different forms of leave, to help employers choose how to structure their leave offerings (e.g., in terms of what types, for how long, and how continuously an employee can use leave).

Distinctions Among Types of Paid Leave

Leave benefits, in short, permit employees to take time off from work (Department of Labor, 2022). Leave may be categorized along several dimensions, including paid/unpaid, government mandated/voluntary, planned/unplanned, as well as the reason for the leave (e.g., holidays/vacation, sick, personal, etc.). Specifically, with paid leave employees receive their regular rate of pay (or some percentage thereof) during the leave, whereas with unpaid leave employees do not receive pay during the time away from work (although, depending on the leave type, they may continue to receive other benefits from the employer). In the U.S., certain federal and state laws mandate unpaid leave (e.g., the Family and Medical Leave Act or FMLA) and in some cases paid leave (e.g., for jury duty, military leave), but beyond those laws, employers have the flexibility to offer a combination of paid and unpaid leave, or even no leave at (e.g., employers with less than 50 employees are not required to offer FMLA leave). Leave is also provided for a variety of reasons, including vacations and holidays, one’s own or family illnesses, maternity/paternity, bereavement, personal leave, and others (see Table 1).

Table 1.

Traditional Categories of Leave.

U.S. Government Mandated Leave	Paid (by government) • Jury duty or witness leave • Military leave	Unpaid • FMLA leave
		o Childbirth, adoption, foster care
		o Care for spouse, child, or parent
		o Employee’s own health condition
		o Care due to spouse, child, or parent on active duty
Voluntary leave offerings: Family and medical	Planned • Maternity/paternity leave	Unplanned • Personal days
		• Sick leave (employee)
	• Sick leave (employee)	• Family leave
	• Family leave	• Funeral or bereavement leave
Voluntary leave offerings: Leisure and other	Planned • Holidays	Unplanned • Personal days
	• Vacations
	• Sabbaticals
	• Volunteering and community service

Note. Voluntary leave may be paid or unpaid, depending on the employer’s policies. However, state laws may require family and medical leave, as well as voting leave, to be paid or unpaid.

Many employers utilize a traditional paid leave system, a policy structure that categorizes employee time off into distinct purposes as shown in Table 1 (e.g., vacation time, holidays, sick leave, and family/personal leave) and allocates a certain amount of time for each purpose (Hurrell & Keiser, 2020). Alternatively, some employers may provide general personal leave for any of these reasons, but such leave is typically of short duration (2–3 days; Martocchio, 2018). An even more flexible approach is a paid time off (PTO) system that is comprehensive of all categories and more flexible for employees (Hurrell & Keiser, 2020); this system is a bank of leave that can be used by employees for any reason (SHRM, 2021b).

It is important to understand the distinctions between the types of leave and their prevalence, as employees may have different expectations for types of leave. For example, Zaharee et al. (2018) found that millennial age employees had an expectation of 3 weeks of vacation, and some organizations have begun to offer time off for volunteering as a way to attract younger workers (Christie, 2019). In a study by Jones (2017), parental leave was of higher value to women employees than men, although both had strong preferences for flexibility and time off benefits. Three of the more common forms of leave are vacation leave, sick leave, and family/personal leave (SHRM, 2021b). Vacation leave is typically pre-planned, or scheduled in advance, and used for the purposes of travel, rest, relaxation, addressing personal matters, and other planned reasons. Sick leave is typically used to care for an employee’s own illness or injury, or depending on the employer, can be used for care of a family member. Family/Personal leave typically bolsters sick leave for short-term absences and is generally used for any purpose, planned or unplanned, including maternity/paternity (SHRM, 2021b). In the following section we discuss why paid leave in its different forms is advantageous for employers to offer.

Why Employees Need Paid Leave

In the U.S., paid leave is important for employees to have, and with limited legislation at the federal and state levels, employers have the greatest influence over paid leave. Many employers are introducing other work-life initiatives, which may be valuable and desired by employees, but these do not substitute for paid leave, particularly for lower income workers (see Kossek & Lautsch, 2018). Moreover, while employers may view time away from work as lost profits, paid leave can be strategically important. It has a high return on investment with positive effects towards worker productivity, morale, job satisfaction, and reduced job turnover (Carmichael, 2018; Chen, 2016; Dobson, 2020; Goodman et al., 2019; SHRM, 2021b). Here, we focus on vacation, sick leave, and family/personal leave, as they are the most common forms of employer-provided voluntary leave, but also because they are likely to be what employees need most to manage work-life balance issues (see Kossek & Lautsch, 2018).

The U.S. Government Does Not Require Paid Leave

First, paid leave is not mandated by the U.S. government, in sharp contrast to other developed countries (Burtle & Bezruchka, 2016; Chen, 2016; Janisch, 2020b). For example, the U.S. does not guarantee vacation time. In comparison, the EU’s Working Time Directive guarantees a minimum of 20 paid vacation days each year (Maye, 2019), and some countries guarantee even more paid vacation time (e.g., France provides 30 days). Some countries like Canada and Japan guarantee less (i.e., 10 days), but have stipulations that increase the amount of vacation based on seniority (Maye, 2019). The U.S. also does not provide paid holidays, whereas some European countries offer as many as 14 (Maye, 2019). Congress has attempted to pass paid vacation acts (Paid Vacation Act, 2013; Guaranteed Paid Vacation Act, 2015), but efforts have been unsuccessful. No states have paid vacation laws on the books either (Dickey, 2015).

Despite the lack of legislation, paid vacation is one of the most common forms of paid leave that employers offer voluntarily; a recent report from the Bureau of Labor Statistics (2021a) indicated access to paid vacation was available to 77% of civilian workers overall, and a private-sector U.S. employee on average receives 10 paid vacation days and six paid holidays annually (Maye, 2019). However, access to paid vacation varies considerably by job and industry (e.g., from 22% of teachers to 93% of professional and technical service employees) and wage level (e.g., only 43% of the lowest 10% wage level had paid vacation), and it is rarer for part-time employees (39%). Length of paid vacation also varies depending on employer size (with larger employers typically providing more) and length of service (e.g., an average of 11 days after 1 year to 20 days after 20 years of service; Bureau of Labor Statistics, 2021a).

The U.S. also does not guarantee paid sick leave, and is only 1 of 11 countries that do not. Most countries (91%) offer at least 2 weeks, and 76% of countries offer at least 6 weeks of paid sick leave, depending on tenure (Heymann et al., 2020). The Healthy Families Act, which would require employers with 15 or more employees to offer paid sick leave, has been introduced and re-introduced to Congress since 2004, but has consistently stalled (Karstadt, 2020). The U.S. did pass its first paid sick leave legislation in 2020, the Families First Coronavirus Response Act, to respond to the impact of COVID-19, but this Act was temporary and lasted less than a year (Department of Labor, 2020). However, by 2020 12 states and 23 cities and counties enacted laws that require eligible employees to receive paid sick leave for personal illness or caring for a sick family member (Maye, 2019).

Although sick leave is not required by law, about three-fourths of all private industry employees and over 90% of state and local government employees do have paid sick leave available to them (Bureau of Labor Statistics, 2021a; Brown & Monaco, 2021). However, paid sick leave also varies by job and industry (e.g., 59% for service occupations vs. 92% for management, professional, and related occupations), as well as employer size (being more prevalent in larger organizations). Lower-wage employees are unlikely to have paid sick leave (i.e., only 35% of the lowest 10% wage level) as are part-time employees (45%; Bureau of Labor Statistics, 2021a). The amount of sick leave also varies based on employer size and years of service but eight to 10 days is typical (Bureau of Labor Statistics, 2021a).

With respect to family leave, the U.S. is the only country (out of 43) in the Organization for Economic Cooperation and Development (OECD) and European Union (EU) that does not mandate any paid leave for new parents (Dobson, 2020). The OECD and EU averages were 18.4 and 22 weeks of paid maternity leave, respectively, with total paid leave available to mothers averaging 51.5 and 63.5 weeks respectively (OECD, 2021). Paid leave payments in these nations vary substantially, ranging from less than 30% compensation up to 100% compensation, with average payments over 50% of earnings. Moreover, many OECD/EU countries offer paid leave for fathers (OECD countries average 8.7 weeks, and EU countries average of 7.1 weeks). Only six countries (including the U.S.) offer no paid leave for fathers (OECD, 2021). Moreover, in the U.S., paid family leave is relatively rare for employers to offer voluntarily, with estimates ranging from only 25%–50% of employers offering paid family leave (Bureau of Labor Statistics, 2021c; SHRM, 2020). Paid family leave also varies by job and industry (e.g., 13% for service to 37% for management, professional, and related), and larger employers were more likely to offer it. Wage level also significantly influences access to leave, such that only 6% of workers in the lowest 10% wage level had paid family leave, and only 11% of part-time workers had paid family leave (Bureau of Labor Statistics, 2021a).

Even though the U.S. government does not guarantee paid vacation, sick leave, or family leave, the U.S. does require many employers to provide unpaid family and medical leave, under the Family and Medical Leave Act (FMLA). The ratified FMLA, passed in 1993, requires employers to provide up to 12 weeks of job-protected unpaid leave to employees but has multiple caveats as to coverage (Janisch, 2020b). Specifically, a covered employer that is required to provide leave is a public agency, public or private school, or private-sector employer with 50+ employees in a 75-mile radius (Chen, 2016; Janisch, 2020b). Employees qualify to be protected by the FMLA if they have worked for at least 12 months and 1250 hours; however, an employer can exclude employees from FMLA coverage if they are in the top 10% of the company’s pay scale, if they are considered essential and if the employer would experience “substantial and grievous economic injury” caused by the employee taking leave (Chen, 2016; White, 2006). Based on these caveats, 40% of U.S. employees are not eligible for FMLA leave, many of whom are private-sector employees, small business employees, and/or low-wage employees (Chen, 2016). Since its passing, a few amendments have been made to the FMLA. One major amendment, the National Defense Authorization Act, deals with special rules that apply to military service situations (Colopy & Dielman, 2009; Department of Labor, 2020). Other changes address those who serve as airline pilots or crew members, and revise definitions of “spouse” to ensure eligibility of employees in legal same-sex marriages (Sholar, 2016).

More progress has been made post-FMLA at the state level with many states passing variations of paid leave laws. For example, California passed the first paid family leave law in 2004 permitting participants to utilize up to 6 weeks of leave after completing a 1 week waiting period, and they receive approximately 45% wage replacement (Kilgour, 2011). 12 states have active paid family and medical leave programs introduced since the FMLA (Bipartisan Policy Center, 2022). While many laws restrict reasons for paid leave, some (e.g., Maine and Nevada) have passed paid-leave-for-any-reason laws that do not require a “covered reason” to be used (Janisch, 2020b). Typical benefits provided by state laws are 8–12 weeks of parental leave; 5+ weeks of family caregiving, between 6 and 52 weeks of personal medical leave, and 5–26 weeks of total paid leave available in 1 year (Bipartisan Policy Center, 2022).

Thus, when considering the above statistics on paid leave along with the limited state legislation on paid leave, it is apparent that providing paid leave is discretionary for individual employers. Although many do offer some forms of paid leave, there is considerable variability in whether leave is offered and how much is provided. Ultimately, many lower-wage and part-time employees, as well as those working for smaller employers and those in front-line occupations such as service, are left without the safety net of paid leave. Yet, they may be the ones who need it most because they cannot afford to take unpaid time off, and are most in danger of voluntary or involuntary turnover when they cannot attend work (see Kossek & Lautsch, 2018).

Other Work-Life Balance Practices May Not Address Employees’ Needs

Second, higher salaries and other work-life balance policies and practices are not substitutes for paid leave. For example, increased salary alone cannot make up for poor leave programs that do not account for factors such as the affordability and availability of childcare or eldercare. Employers may choose to offer higher salaries or subsidize childcare, but with quality childcare in short supply, employees may have trouble obtaining such care, even if they can afford it. Larger employers might offer on-site childcare for their employees, as companies such as SAS, Capital One, and Aflac do (Fortune, 2017), but this is still quite rare and may not be feasible for many employers due to cost and liability issues. For example, in a SHRM survey of employee benefits, only 4% of employers offered on-site childcare; some employers offer childcare or eldercare referral services but these are also relatively rare (11% and 10%, respectively; SHRM, 2020). Although employer-sponsored programs such as referral services, subsidized childcare, or on-site childcare can help employees manage caregiving issues, these still do not address needs for intermittent care (e.g., when an employee’s child is ill and must stay home, or a childcare care center is temporarily closed). To address such failures of childcare, some employers allow their employees to bring their children to work in an emergency (SHRM, 2021a), but this may be impractical for many front-line jobs or industries. Similarly, the ability to work remotely may not be possible for many jobs, and does not fully address an employee’s own illness if they are too sick to work.

Flexibility in hours is another option, but suffers from many of the same issues in terms of practicality. Some industries (e.g., manufacturing and nursing) have shifts and mandatory overtime that make the implementation of flexible work practices problematic (see Williams & Boushey, 2010). Many of the jobs and industries that currently lack paid leave (e.g., service, as noted earlier) are also unlikely to be able to offer these kinds of flexible alternatives. Although many employers may be taking steps to enhance flexibility (e.g., teleworking or remote work) for their employees, the types of flexibility offered may not match what employees need, as needs can differ by occupation and income level (Kossek & Lautsch, 2018; Williams & Boushey, 2010). Flexible work practices are also more common for white collar than blue collar workers (Kossek & Distelberg, 2009) and may be more beneficial to high-level professional and managerial employees, but may not be as beneficial for mid- and low-level employees who may develop a more transactional mindset with the organization, which can contribute to increased turnover if flexible work practices are restricted (Kossek & Lautsch, 2018).

When we consider the previous statistics showing disparities in paid leave across jobs and wage levels, we also see that work-life balance programs may be unavailable or impractical for the same types of jobs that lack paid leave. Thus, lower-level and lower-wage workers may be expected to work when they or their family members are ill, and they may be unable to afford to take unpaid time off or fear losing their jobs if they do so. As Kossek and Lautsch (2018) noted, access to work-life flexibility (including paid leave) is “a growing form of job inequality.”

Other Benefits to Employees From Paid Leave

Employees benefit in other ways from paid leave programs. In the U.S., working parents struggle to piece together the various paid and unpaid leave that varies depending on employer size, type of work, state of residence, work history, and other factors (Isaacs et al., 2017). Offering paid leave assists in addressing conflict and tension that occurs in deciding between competing important priorities; often employees have to choose between taking care of one’s own health or the health of family members versus earning a wage or keeping one’s job, and/or risking the health of coworkers by coming into work while ill (Brown & Monaco, 2021; Dobson, 2020; Martin et al., 2021). Indeed, it is possible that the lack of paid leave in the U.S. has contributed to the country being hit harder by the pandemic, as many employees have not been financially able to self-isolate (Lester et al., 2021).

Without dedicated paid leave for family/personal reasons, people repurpose vacation time (if they have it), which over time contributes to burnout and other negative mental health outcomes like depression (Dobson, 2020; Kim, 2019). For example, Kim (2019) found for every 10 additional days of paid vacation leave, the odds of depression in women were 29% lower. Paid leave also has advantages in terms of flexibility that FMLA leave does not. For example, whereas the FMLA is specifically regulated with respect to coverage in terms of caregiving recipients (i.e., spouse, child, or parent) and for medical conditions only, paid leave can be more flexible to include siblings or other relatives, and could also be provided for family needs that are not medical in nature (e.g., funeral planning, estate administration; see Johnson, 2002). However, employers need to be careful when substituting paid leave for FMLA leave, and ensure that the paid leave categories are consistent with FMLA leave (Johnson, 2002).

Summary

In the above sections we have made the argument that employees need paid leave because (1) government protections are lacking, (2) many types of employees do not receive paid leave, (3) other work-life balance practices are insufficient to address the problems that paid leave can ameliorate, and (4) employees benefit in other ways from paid leave. Although many employers may view paid leave as a burden, we propose that it should be reframed as an opportunity. Specifically, in the next section we discuss that paid leave is also beneficial for employers as part of HR strategy and DEI initiatives, while also being relatively affordable.

Why Employers Should Offer Paid Leave

Paid Leave Can Be Strategically Important to Attract and Retain Talent

Salary has often been a significant focus of employers in the competition to attract and retain talent. However, to differentiate one’s company from other labor market competitors, paid leave may be particularly advantageous. First, there are unintended consequences for the employer from raising salaries for external hires, in the form of salary compression and inversion. Specifically, if an employer raises salaries to attract new talent into the company, it can happen that new employees may make close to what current employees are making (salary compression) or in some cases, more than current employees (salary inversion). These situations occur often when there are labor shortages, and if not addressed, can lead to feelings of unfairness on the part of current employees, who may see that their loyalty is being undervalued. They may then look for opportunities outside the company as a way to raise their salaries, leading to potentially costly turnover (McNatt et al., 2007). Alternatively, employers may determine that it is better to raise the salaries of current employees to combat salary compression/inversion, which can be a very costly option. Rather than raising salaries as part of a bidding war for talent, we suggest that paid leave might offer a way to an employer to stand out in their recruiting process. Employers can offer better leave as a way to help employees manage their work-life balance, leading to enhanced attraction and retention of workers (Hurrell & Keiser, 2020; Zaharee et al., 2018). Supporting this, a study by Jones (2017) found that of the top five benefits most valued by job seekers, four of these involved flexibility and work-life balance.

As noted earlier, leave is highly valued by job seekers, but it also will appeal to current employees. Permitting one’s employees flexibility to take care of growing families, medical dilemmas, and caregiving without having to make financial trade-offs assists with improving retention and productivity while improving labor force participation (Romig & Bryant, 2021). At the time of this writing, it is currently an employees’ market with ample job opportunities and organizations actively competing for candidates who are also evaluating each organization’s compensation and benefits packages. Paid leave offerings can influence retention of employees, and this retention results in large cost savings for the employer who does not lose productivity from vacant positions and the costs of an extended candidate search process (Rupp & Zeager, 2018; Zaharee et al., 2018). Furthermore, paid leave flexibility has assisted mothers in the years following childbirth, family caregivers, and those with serious health conditions to keep their jobs or continue a career, helping with employee retention (Romig & Bryant, 2021).

Beyond a way to differentiate from competitors, paid leave programs embody the philosophy that an investment in associates yields a further investment from associates in the company. This returned investment can be seen via morale, the speed at which individuals return to work, and retention (Carmichael, 2018; Council of Economic Advisors, 2014). Moreover, good leave policies can also enhance the employer’s reputation, making it easier to attract workers and build trust with employees, providing a supportive workplace culture that, especially when reinforced by supervisors, helps with retention (Goodman et al., 2019; Koslowski, 2018; Zaharee et al., 2018). Thus, even if employees do not currently need good leave policies to help with work-life balance, they may interpret the presence of such policies as a signal of employer support (Casper & Buffardi, 2004).

Paid Leave Is Not That Expensive

Employers may be concerned that paid leave will be costly both directly in paying employees for not working, as well as indirectly by increasing administrative hassles. Certainly, leave policies affect employers financially, administratively, and operationally; therefore, these policies need to be well-designed (SHRM, 2021b). When employees take leave, companies may face indirect costs such as hiring replacement employees, reassigning work tasks, and coordinating employee schedules; however, according to Rossin-Slater and Stearns (2020), no evidence has been found that firms’ turnover or wage costs increase when leave claim rates rise. In fact, compared to firms using a PTO bank system, firms offering traditional vacation policies as part of a traditional leave system were significantly more profitable (Hurrell & Keiser, 2020). For example, looking at the cost–benefit analysis of paid sick leave, estimates suggest that organizations pay an average of $6.87 weekly per worker for the leave policies, but on average gain $12.32 of value from increased productivity and reduced turnover per worker per week (Chen, 2016). Additionally, paid leave does not always have to be funded by employers, but may be employee funded in certain states (e.g., through a special state payroll tax in California’s paid family leave program; Kilgour, 2011).

Paid leave can also benefit employers directly in terms of cost savings from lost productivity. When an employee is ill at work, they are not as productive, and allowing them to take time off can aid in faster recuperation, getting them back to full productivity. Moreover, an employee who is ill runs the risk of spreading a contagious disease to other coworkers whose productivity may then be harmed, or even to customers (Heymann et al., 2020).

Research has also shown that better-paying organizations are more likely to offer paid leave (Rossin-Slater & Stearns, 2020). These organizations may be better-paying because paid leave is associated with increased productivity and morale, greater job satisfaction, and lower job turnover (Chen, 2016; Dobson, 2020; Goodman et al., 2019; SHRM, 2021b). Additionally, supervisor support may be an important factor in these positive organization outcomes. Survey research by Goodman et al. (2019) indicated that supportive supervisors influenced men’s length of family/personal leave. Specifically, high family-supportive supervisor behavior was associated with shorter leave duration among men. This shortened duration may be due to having more access to flexible schedules or other family-friendly benefits, permitting more integration of work and caregiving demands (Goodman et al., 2019). Thus, paid leave can benefit a company’s bottom line at little cost to the employer, and supportive supervisors can further enhance a company’s ability to realize these benefits (Goodman et al., 2019; Rossin-Slater & Stearns, 2020).

Providing paid leave may also serve as a counter to unionization. Being a union member is a significant predictor of workers’ taking leave from work, especially paid leave, and is related to less post-leave turnover (Boushey et al., 2013; Park et al., 2019). Additionally, due to unions’ collective bargaining for better benefits, unionized workers receive more financial support and savings for paid and unpaid leave as well as less costly healthcare coverage and premiums (Park et al., 2019). If unionization is a concern, an employer might consider offering paid leave benefits to avoid unionization. Ultimately, the employer continues to avoid union interference with decision making and employees receive a “spillover” of rewards obtained by other unionized employees within the industry or geographic area.

Paid Leave Can Be Part of a DEI Initiative

Paid leave programs can also aid with inclusion and representation in the workforce. Specifically, these programs permit a balance between caregiving and performing job duties, which aids women with joining or re-joining the workforce after childbearing (Goodman et al., 2019). Access to maternity leave, especially paid leave, can help increase retention when women return to work after childbearing (Rupp & Zeager, 2018; Sterling & Allan, 2021). Moreover, working women, Latinos, low-wage employees, and less-educated employees have been historically less likely to have access to paid sick leave and family leave (Chen, 2016). Thus, there is disparate access to paid leave, and the lack of access to paid family and medical leave perpetuates racial disparities to wealth and economic support. For example, people of color tend to experience more caregiving responsibilities and greater health needs, highlighting the importance of paid leave (National Partnership for Women & Families, 2018). Wage loss from unpaid leave also has racially different impacts on families. White families lose about 58% of their quarterly income after taking 12 weeks of unpaid leave; this percentage increases for Black, Asian, and Hispanic families (Boesch, 2021). Beyond racial disparities, lack of paid leave also impacts individuals from lower socioeconomic status. Generally, individuals within the lowest household income quartile have the most limited access to flexibility in their work (including paid leave) and often have to come to work while sick (Kossek & Lautsch, 2018). Thus, designing paid leave policies in an equitable way can aid in improving workforce inclusion and representation, helping disadvantaged populations gain more access to wealth and economic support structures. Since U.S. legislation on paid leave has stagnated, employers can address this gap while creating their policies (National Partnership for Women & Families, 2018).

Benefits to Society From Paid Leave

In recent years, many employers have engaged in corporate social responsibility, looking beyond the profit motive to focusing on ways to make a difference in society. Beyond realizing benefits within the company, paid leave can also benefit U.S. society, including the younger and older generations as well as the employees who utilize it. Leave is positively associated with health and well-being of employees in general (e.g., Fritz & Sonnentag, 2006). Paid family leave benefits new mothers specifically (e.g., de Bloom et al., 2009; Van Niel et al., 2020), but benefits their families as well. Specifically, paid family leave and longer leave is associated with improved child health (Burtle & Bezruchka, 2016; Goodman et al., 2019; Rossin-Slater & Stearns, 2020; Shepherd-Banigan & Bell, 2014). Leave permits more time for breastfeeding, which research has shown has numerous health benefits for children, and time for families to take children to receive their immunizations, both of which help reduce the infant mortality rate (Burtle & Bezruchka, 2016; Van Niel et al., 2020). Paid leave helps fathers alleviate work-family conflict and increase investment in their families and engagement in children’s lives (Petts et al., 2020). In addition to alleviating work-family conflict, access to paid leave may influence participation in the labor market after childbirth. After childbirth around 30% of women leave the workforce, but access to a paid family leave program can reduce this departure of the workforce by 20% in the year of a birth (IWPR, 2020; Jones & Wilcher, 2020).

Giving paid sick and family leave helps prevent employees from having to make the challenging and stressful decision between taking care of themselves or family members and earning a wage, and particularly for those lower-wage employees who are most unlikely to have paid leave. As mentioned earlier, the FMLA provides unpaid leave, but many employees cannot afford to take time off unpaid. Employees who lack paid leave may have to leave a job or be terminated for absenteeism, and such job loss can place lower-wage employees closer to poverty. Even higher-wage professional employees may be impacted by a lack of flexibility with respect to leave, and resulting job changes or job loss may lead them to economic vulnerability, as well as negative effects on other benefits like health insurance and retirement savings (see Williams & Boushey, 2010). Furthermore, as an increased percentage of the U.S. population is aging, family caregivers remain an important source of long-term service and support for older adults (Chen, 2016). Employers will need to acknowledge this society-wide increased need as employees balance caregiving with their job tasks.

Recommendations for Designing Paid Leave Programs

In designing a paid leave program, employers will need to decide between separate leave categories versus a PTO bank, which forms of leave that might be provided (see Table 1), and how much time to offer. First, employers should consider offering a traditional paid leave system with distinct categories, as this type of system is associated with increased satisfaction, employee productivity, and organizational profitability compared to a PTO bank style system (Hurrell & Keiser, 2020). Although PTO banks provide greater flexibility, research on choice behavior has indicated that too much flexibility can be problematic (e.g., Iyengar & Lepper, 2000). If employees make bad choices in allocating their leave they may be dissatisfied with the system. For example, with a PTO bank, employees may tend to mentally allocate all PTO to “vacation” and attend work when ill, defeating the purpose of PTO.

Second, employers should consider offering the three main types of leave that we have focused on, namely, vacation, sick leave, and family/personal leave, as these are the most common forms (SHRM, 2021b) and are the ones that employees need most to recuperate from burnout, address their own medical needs, and tend to work-life balance issues. When designing a paid leave plan, employers will also have to determine what happens to unused leave; some options can include carrying over leave from year to year (up to a maximum), cashing out unused leave for pay, donating it to a “catastrophic” employee leave bank for co-workers’ emergencies, or “use it or lose it.” The latter option may be problematic as a flood of employees with unused leave (especially vacation or PTO) may try to use it at the end of the year to avoid losing the paid time off (Martocchio, 2018).

Employers should also note that despite the relative prevalence of paid vacation and the health and well-being benefits for taking vacation (de Bloom et al., 2009), many employees do not use their vacation time (SHRM, 2017). This is especially true when they believe that they will be unable to detach from work, or expect few positive and more negative outcomes from using vacation leave (Kuykendall et al., 2021). Thus, for vacation leave to be value-added for employees, organizations may need to change their cultures to support vacation leave use and reinforce that time away from work enables employees to handle illnesses and take care of personal matters, but also aids employees’ physical and emotional well-being (SHRM, 2021b).

With respect to the amount of leave provided, employers may wish to look at state laws that govern leave amounts for guidance. For employers who operate in multiple states with different laws, it might be prudent and administratively convenient to institute standard policies based on the most generous state laws, to cover employees across all their operations. Similarly, multinational employers may want to take into account the laws of the other nations in which they operate when setting leave amounts for U.S. employees. Alternatively, the Bureau of Labor Statistics (2021a; 2022b) provides useful normative data on paid leave amounts by employer size, industry, etc. If the employer operates in a unionized environment, then leave practices and policies will likely be negotiated as part of a collective bargaining agreement.

Finally, personal leave policy should be equitable and cover the needs of all employees (Burtle & Bezruchka, 2016; Chen, 2016; National Partnership for Women & Families, 2018; White, 2006), and should be supported throughout the organization. Having supervisors who are supportive of employees’ taking leave also leads to beneficial outcomes. For example, supervisors who supported employees’ needs to deal with work-family issues resulted in a stronger positive impact on their staff’s well-being more than other general forms of social support at work (Goodman et al., 2019). Thus, in addition to just providing leave, HR may need to incorporate training or other initiatives to address the advantages of supportive supervision to reap the benefits of paid leave.

The Need for Continued Assessment

Here we have addressed the value of paid leave to employees, employers, and society; to maintain that value, employers need to continually assess their policy offerings. For example, COVID and pending government legislation may impact paid leave policies. Brown and Monaco (2021) reported that during the COVID-19 pandemic, 25% of private industry businesses modified or created paid sick leave or PTO plans. Of private industry and service-producing businesses, most added more than 10 paid leave days (37–39%), followed by one to 5 days (33–34%), and six to 10 days was the third most prevalent (19–20%). Meanwhile, goods-producing businesses primarily added one to 5 days (44%; Brown & Monaco, 2021). Additionally, the first U.S. government-provided paid leave occurred during the COVID-19 pandemic, through the Families First Coronavirus Response Act, but this was only temporary and covered employers with less than 500 employees (Janisch, 2020a). Similarly, around 90% of businesses that modified existing paid and unpaid sick leave plans or created new plans during the pandemic indicated their plan changes were temporary (Brown & Monaco, 2021). These temporary changes included adapting accrual rates, covered relations, and employment time limits before use (Janisch, 2020a).

Meanwhile, states are beginning to enact more permanent changes. For example, Colorado has passed legislation with a provision for mandatory paid sick leave in case of another pandemic (Janisch, 2020a). Additionally, public sentiment for paid leave legislation appears to be increasing (Isaacs et al., 2017; National Partnership for Women & Families, 2018; Petts et al., 2020), and support for paid leave is increasing among small business owners, who are often assumed to be most affected by paid leave programs (Bartel et al., 2021). Despite such support, federal legislation has been stuck in gridlock; thus, the focus on paid leave has transitioned away from the Legislative branch to the Board Room. However, some employees are not satisfied with the progress being made by employers and are calling upon fellow workers to bring about the changes they want to see. For example, unionization efforts are on the rise among employers such as Starbucks and Amazon (Rowan, 2022), and paid leave can be a part of the collective bargaining agreements. Thus, employers should be proactive in addressing the paid leave preferences of their employees.

Conclusion: Why Your Company Should Provide Paid Leave

In this paper, we have discussed the benefits of paid leave to the employer, employee, and society. Naturally, businesses care about the impact on the bottom line, and may want to conduct a cost–benefit analysis of paid leave. The Bureau of Labor Statistics (2021b) reported as of June 2021, paid leave cost on average $2.70 per week per private industry employee, $2.88 per civilian employee, and $4.03 per government employee. Despite this cost, the average benefit of increased productivity and reduced turnover that companies obtain in return is about $12.32 per worker per week (Chen, 2016). Thus, paid leave is expected to cost employers little to nothing. A company’s bottom line may be further enhanced through paid leave’s association with increased productivity and morale, greater job satisfaction, and lower job turnover (Chen, 2016; Dobson, 2020; Goodman et al., 2019; SHRM, 2021b).

Additionally, leave policies may serve as a competitive advantage, helping an employer’s pay strategy to be inimitable by competitors. Many employers can compete on base salary to attract and retain talent, but benefits such as leave policies are not as replicable and can help diminish salary inflation. Employees will still receive value from their employers, but in a different pay mix. Ultimately, any organization represents all its employees—through adopting a paid leave system, an employer may begin to redefine its labor market benefiting itself, its employees, and the U.S. society as whole in the process.

Author Biographies

Dr. H. Kristl Davison is an Assistant Professor of Management at Appalachian State University, with experience teaching and publishing in Human Resources and related areas for over two decades. Prior to her academic career, she worked as a compensation consultant as well as an employee selection specialist.

Adam Scott Blackburn is an Organization Development Analyst in the healthcare industry, with degrees in Industrial-Organizational Psychology and Human Resource Management; Management; Psychology; and Criminology. Beyond being a prolonged student, Scott has expanded his practitioner experience by consulting for small businesses, pursuing certifications, and networking with other early-career professionals.

ORCID iD

H. Kristl Davison https://orcid.org/0000-0003-2892-7169