The Unintended Consequences of Paid Family Leave

Date: August 04, 2016

Small business owners feel the pressure as paid family leave expands nationwide.

Paid leave is sneaking up on small business owners.

The benefit has been steadily expanding across the country and in several industries, the Associated Press reported Tuesday.

The technology sector has seen the biggest growth in family leave policies, according to the report. About 30 percent of employees in the tech industry worked for companies with a paid leave policy as of 2015, AP reported, and 12 percent of all employees nationwide had access to paid family leave in 2015.

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Jobs in the service, manufacturing, farming, and construction industries have the lowest percentage of paid leave policies; less than 10 percent of employees in those industries are eligible for paid leave. 

Paid leave has become a hotly debated issue in this election cycle, and part of the Democratic platform calls for a nation-wide, 2-week paid family leave policy. But this expansion of benefits has taken a toll on small business owners.

Employee replacement costs can be a big issue for small business owners when an employee goes on paid leave.

“A worker taking extended time off leaves a hole that has to be filled by other staff working overtime or by finding, hiring and training a new temporary employee as a replacement—both of which are direct costs to the business,” Small Business Trends reported last month.

If businesses cannot find a replacement in a timely manner, some shifts might go unfilled, which will inhibit an owner’s ability to run their business efficiently, according to Small Business Trends.

Paid leave is another regulatory burden small business owners must track.

“A small business may not have an HR person, which means that, in spite of its best intentions, the company could fail to comply with the new law, resulting in fines and penalties,” Frank Kerbein, director of the Center for Human Resources at the Business Council of New York State, told Small Business Trends.

In many cases, employees and business owners reach their own benefit arrangements that are mutually agreeable to each party. If paid leave is mandated, business owners will likely be forced to reduce or eliminate other benefits that are actually more important to employees.

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