How do I write a parental leave policy?

What to consider when creating your company's parental leave policy.

In this issue:

• What do I need to consider when creating a parental leave policy?

• How to estimate parental and medical leave top-ups

• Taking the drama out of parental leave

The parental leave policy seems simple in theory, but even the most well-intentioned policies can fail if you don’t think about edge cases and the details of execution.

On paper, everything sounds clean:
12 weeks, top up state-paid parental leave or short-term disability to save money, give them an FMLA form, buy a baby gift, and let the manager figure out coverage.
In practice, you’re trying to calibrate weekly benefits against semimonthly payroll, sprint planning against biological imperatives, disability accommodations, anti-discrimination regulations, a whole lot of feelings, and circumstances no one can predict.

In this post, we’ll break down some of the things you should think about before committing your policy to paper, including:

• What factors to consider when scoping your policy

• How to estimate top-up payments

• What it looks like when you don’t think everything through

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What do I need to consider when creating a parental leave policy?

For many, triangulating a multi-state handbook policy is like a trip through the 7 layers of hell.

The worst policy of all, striking fear into every HR leader and PeopleOps specialist is...

😱 The Parental Leave Policy 😱

Parental leave isn’t just about giving people 12 weeks off.

There’s disability:

Private insurance (if you have it),
state disability (where applicable),
and how much longer their job is protected based on disability.

There’s payment:

Whether you’ll top up, pay in full, or not at all.
How in the world you’ll handle all the variations of state pay, disability insurance pay, and what happens if payments don’t last till the end of leave for everyone.

And what are you supposed to do about their health insurance deductions this whole time?

There’s the schedule:

How do you handle intermittent leave in real life? What about delayed leave?
What about partial days, medical appointments, and those last few weeks before the baby drops when anything goes?

There are the accommodations:

Physical accommodations, scheduling accommodations, accommodations to their responsibilities and work locations.

Lactation accommodations with special rooms and rules about the chair and the fridge.

And don’t forget PTO:

How does that fit in? How do you get parents to come back to work if you have unlimited PTO? And what about sick time?

Or what about those special mini-leaves that states like Vermont and Washington have?

All of these decisions can take hours. People wind up so lost in trying to navigate the maze of regulations that they forget what they were aiming for in the first place.

What comes out is a Frankenstein of caveats and legalese.
Or a “f*** it, 6 months of pay for everyone” policy.

There isn’t enough room in a single post to go through everything you should consider, so we built a free tool to help. The Practical Guide to Building Parental Leave Policies that Work takes you through all the questions you should think about when creating your parental leave policy.

It’s made to walk you through each decision step-by-step, posing edge cases and practical considerations you may not think of until it’s too late. And it’s totally free. You don’t even have to provide your email (although we’d love to hear from you if you have questions).

But what if instead of trying to navigate the regulations, you could focus on what you actually want the policy to look like?

But what if it weren’t up to you to flag regulation conflicts?

What if you didn’t have to spend hours searching through SHRM or Mineral to decipher the regulations in 35 states?

SHRM: Where passive-aggressive meets the passive voice, with a mild undertone of discrimination.

Mineral: Where you search for 45 minutes and the best you come up with is “it depends.”

What if someone could flag all the unanticipated consequences and edge cases that you haven’t thought of so you can focus on what’s best for your budget and culture?

We’re developing a tool that navigates the regulations for you and flags the traps before you fall into them. All it takes is one 30-60 minute conversation.

If you’d like to be one of our first customers in the pilot phase, contact us.

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How to estimate parental and medical leave top-ups

It’s undoubtedly simpler to keep paying your team their full salary during leave, but not everyone has the budget for it. Short-term disability insurance and/or state-paid family or medical leave can subsidize the cost of parental leave, but “topping up” comes with a lot of administrative overhead.

Leave management companies like Cocoon or Tilt can help, but may not be worth the investment if only one or two employees use it each year.

So how do you top up state paid parental leave without a leave management provider?

The challenges:

🤔 𝗛𝗼𝘄 𝗱𝗼 𝘆𝗼𝘂 𝗸𝗻𝗼𝘄 𝗵𝗼𝘄 𝗺𝘂𝗰𝗵 𝘁𝗼 𝘁𝗼𝗽 𝘂𝗽 𝗕𝗘𝗙𝗢𝗥𝗘 𝘁𝗵𝗲 𝘀𝘁𝗮𝘁𝗲 or insurance company 𝗮𝗽𝗽𝗿𝗼𝘃𝗲𝘀 𝘁𝗵𝗲 𝗰𝗹𝗮𝗶𝗺?

There are lots of variables and qualifications that affect someone’s benefit amount, including the maximum weekly benefit, how long they’ve lived in a state, how much they earned at their last job (or if they had an income gap), and what other sources of income they’re receiving.

I once worked with a dad in Oregon whose claim wasn’t approved until after he came back to work (see below).
I once worked with a mom in California who got a letter from the insurance company saying her claim was approved for $1,000 per week, but when the checks came, they were only $20.

🧮 𝗛𝗼𝘄 𝗱𝗼 𝘆𝗼𝘂 𝗰𝗼𝗻𝘃𝗲𝗿𝘁 𝘀𝘁𝗮𝘁𝗲 𝗯𝗲𝗻𝗲𝗳𝗶𝘁𝘀 (𝗽𝗮𝗶𝗱 𝘄𝗲𝗲𝗸𝗹𝘆) 𝘁𝗼 𝗮 𝘀𝗲𝗺𝗶𝗺𝗼𝗻𝘁𝗵𝗹𝘆 𝗽𝗮𝘆 𝗰𝘆𝗰𝗹𝗲?

Here’s the formula:

1 month = 4.28 weeks
except when it’s 4.48 weeks
except when it’s 4 weeks
except every 4 years when it's 4.14 weeks

Just kidding.

Here’s how I do it:

1️⃣ I make a conservative estimate about how much the state will pay.
Most states have benefit calculators that do the work for you. Our State Parental Leave resource has links to the each state benefit calculator.

When in doubt, I round down.

2️⃣ I calculate the top-up based on the conservative estimate in Step 1.
First, you’ll have to convert the weekly state or insurance benefit amounts to your biweekly or semimonthly pay cycle.

For semimonthly, the formula is:

[(Annual salary ÷ 52 weeks) – (Estimated weekly benefit from the state)] x 52 weeks ÷ 24 semimonthly pay cycles

For biweekly, the formula is:

Biweekly salary – [(Estimated weekly benefit from the state) x 2]

3️⃣ I pay the estimated top-up amount on regular payday until their state claim is approved.

(You’ll probably have to process this as an off-cycle payroll.)

4️⃣ When the state and/or insurance claim is approved, I reconcile any differences between my estimate and what the state actually approved.
Since I was conservative, any differences will probably be in the employee’s favor (meaning I didn’t overpay). The formula looks like this:

Convert the total benefit period to days: (Number of weeks approved x 7)

[(Benefit period in days) ÷ 365] x annual salary = Full salary for the entire benefit period

(Full salary for the entire benefit period – Total approved claim benefit) ÷ Number of pay periods = Per-pay period top-up amount

[(Regular salary per period x Pay periods elapsed) – [(Per-pay period top-up amount – Estimated pay period top-up amount from step 2) x Pay periods elapsed] = Amount owed to the employee

5️⃣ I make them whole in a lump sum.
If I overestimated the state payments (has never happened), I decrease the remaining payments slightly (or I don’t if it’s not worth quibbling over).

6️⃣ I then continue to pay the adjusted top-up amount on the regular pay cycle (better if their return date is unknown) or pay a lump sum for the rest of their leave. If you pay it in a lump sum, just make sure to spread out the pay period over the full remainder of their leave so they don’t get killed on taxes.

You can do something similar with private short-term disability.

I made a quick and dirty calculator, if the math makes your head hurt.

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Take the drama out of parental leave

“Is this because I said I wasn’t pregnant?” He scratched his beard.

A new dad had just been denied the disability insurance payments he was counting on to get through his leave. I was on the call to figure out what to do next.

The Portland-based company had a generous short-term disability policy, so they could afford to offer 12 weeks of paid leave. Or so they thought.

Short-term disability insurance was supposed to combine with Oregon’s state parental leave to offer 100% of regular salary. Except that no one realized that stacking insurance and state benefits didn’t work that way on their policy.

He was the first non-birth parent to take leave after Paid Leave Oregon launched and it wasn’t working as planned.

I hadn’t written the policy, but here I was trying to navigate a state benefit that seemed as undercooked as the company policy. With an anxious new dad in front of me and no idea what to do next.

And yes, his claim was denied because he wasn’t pregnant.

Delivering bad news no one saw coming is one of the worst parts of my job. “Yeah. Since you didn’t actually have the baby, you haven’t had a medical event. No medical event, no doctor’s note. No doctor’s note, no disability,” I said. “At least, that’s how the insurance company sees it.”

“So how am I going to get paid for the next 3 months?”

“Oregon pays about $1500 per week,” I said. “...before taxes.”

He was an engineer. And he could do math.

“That’s less than half of my salary. I have a mortgage. And a new baby. Isn’t the company going to pay the rest? The policy says...”

He was right. The handbook said parents would get fully-paid parental leave for up to 12 weeks. When they wrote it, the company thought the state and insurance company would be paying the bill. There was time to tweak things for the next baby, but for now, the company was probably on the hook.

“Okay,” I said. “Just let me know when the state approves your claim and we’ll figure it out later. In the meantime, I’ll just keep you on regular payroll.”

It would have been fine if there hadn’t been some kind of processing delay with the state. By the time his claim was finally approved, he was already back at work. And in Oregon, you can’t deduct an overpayment from an employee’s wages through payroll. They’re supposed to pay the company back separately, with a check or something. But that would have meant paying the taxes on the repayment twice. And who has a checkbook anymore? The whole thing made my head hurt.

“F*** it. I’ll ask the leadership team if it’s okay to just let it go,” I said. “No promises, but I’ll do my best.”

When I tried to explain how we got here, the founders just looked back at me with blank stares. “…Or we can just let it go,” I said brightly.

“Yup. That sound good,” they said.

Luckily, in this case the employee came out ahead and had extra budget for diapers. But they don’t always.

No one can predict all of the surprises (good and bad) that a new baby can bring. Vendors may help with administering all the variables, but policy design is at the company’s discretion. Calibrating insurance, state PFL, and regulations across multiple states can feel like playing with an Ouija board.

You have to test the edge cases by imagining everything that could possibly go wrong.

It can be fun. Like writing a soap opera. But it feels awful when you miss something and someone else has to bear the consequences in real life.

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Resources

These tools and resources are meant to simplify creating a parental leave policy, but the truth is, it’s always hard.

🗺️ If you need more guidance scoping your parental leave policy, check out the free Practical Guide to Creating Parental Leave Policies that Actually Work.

📕 For more about state-paid family leave in the 13 states that have it, check out our State Paid Parental Leave Resource.

🧮 For help estimating top-up amounts, try the quick and dirty calculator.

📚 For more information about payment structures, check out this post (coming January 20).

🦾 If you’d like to work on it together, contact us to be part of the pilot program for the Parental Leave Policy Builder. We’d love to meet you.