Why Offering Paid Leave Is Good for Your Business

What is paid leave?

Paid leave is when an employee takes time off work but remains compensated. There are several types of paid leave, such as vacation time, holiday time, sick leave, bereavement leave, sabbaticals and more. 

Whether an employee receives pay for time off and what activities constitute paid leave is often up to the employer’s discretion. However, employers must ensure that paid leave is paid fairly per antidiscrimination laws and regulations.

Why is offering paid leave good for your business?

Although you might not like paying employees for not working, paid leave can be advantageous to your business. Here are a few reasons why paid leave is good for business.

1. Enhanced employee recruitment

Flexible benefits have become popular among younger workers, especially benefits like flextime, remote work and — you guessed it — paid time off. At the very least, you should offer some form of paid time off to stay competitive when recruiting employees.

“We’re in a time where workplace policies need to keep up with the realities of workers and their families,” said Karen White, former director of public policy and analysis and community engagement at the Center for Women and Work at Rutgers University. “Workers are paying attention to the kinds of benefits they’re being offered when they consider new jobs.”

In other words, if you want to bring on the best talent available, you need to meet their demands and offer good compensation and employee benefits, like paid leave. To attract the best employees, you can even take it one step further by offering unlimited PTO. A Jobslist report showed that three out of four employees feel positive about unlimited PTO policies, while 78 percent support mandatory PTO. 

The thought of offering unlimited PTO may sound scary, but it’s not. The term isn’t literal — your employees still have to work — but it gives them the freedom to take time off when needed. Of course, that time off will need to be approved by a manager to help allay finding yourself understaffed during your busy season.

2. Improved workplace health and safety

Creating a safe and healthy workplace is an essential responsibility for every employer, and paid leave can help you accomplish that. A sick employee with paid leave will feel comfortable staying home instead of coming to work and potentially infecting others or possibly getting injured on the job.

“Presenteeism is when people go to work sick and cause public health issues,” said White. “And the fact is that if people were able to take the time to stay at home and take care of themselves [with pay], this would not happen as often.”

The National Partnership for Women and Families estimates that presenteeism costs the United States more than $1.1 billion annually in preventable emergency room visits among workers without paid sick days. To help avoid or reduce this, consider incorporating paid sick leave policies into company budgets.

3. Greater productivity

A major benefit of implementing paid leave policies lies in improved productivity. For example, workers who would otherwise come into work sick — either because of a need to make money or fear of losing their position — are free to stay home, which protects the rest of the workplace from infection. The spread of an infectious disease can have a devastating effect on productivity.

On the family leave side, many employers already offer family leave, even if they are not required to do so by law. However, many small businesses do not extend paid leave to their employees. When workers have the security of knowing they won’t lose out on pay due to caring for a newborn or another family member, they tend to have less stress in the workplace and more focus on their assigned tasks. This can lead to reduced mistakes and increased overall productivity.

“A happy, more satisfied employee who is not stressed out about family care issues is much more able to focus on doing a better job,” White said.

4. Heightened employee morale

By offering paid leave, companies are promoting a healthier work-life balance, which also contributes to the aforementioned stress reduction that translates into increased employee morale. When employees come into work refreshed and optimistic, their positivity can radiate through your office and impact others. This can help improve your overall employee morale and company culture. Additionally, paid leave is a great signifier to your staff that you care about them and want them to be happy and healthy.

5. Increased employee retention

Not only can paid leave policies help you attract new talent, but they can also help you retain them as well. If you offer a paid leave program and boost employee retention rates, your company can avoid losing workers you’ve already substantially invested in and who know how the workplace operates.

“We did research on women in law firms, and what we found was that law firms invest an enormous amount of time and resources in hiring and training new attorneys, but if they don’t provide paid family leave, when female attorneys go off on maternity leave, they are less likely to return,” White said. “So off goes all those training dollars, time and resources invested in that person.”

If you care about employee turnover and long-term business success, you’d be wise to offer paid leave. Business owners reap the rewards of providing their employees with what they need, whether those rewards take the form of improved employee retention or heightened productivity.

Is paid leave mandatory?

Yes and no. No federal law requires United States businesses to offer employees paid leave, but some state laws may require paid sick leave. For example, New Jersey requires employers of all sizes to provide full-time, part-time and temp employees with up to 40 hours of earned sick leave per year. This applies to almost all employees in New Jersey, and the sick leave can be used to care for themselves or a loved one. Brush up on all state or local laws that apply to you and your staff.

Employers should think twice about forgoing paid leave just because it is not legally required. While paid leave does represent an expense, consider it more of an investment than a simple expenditure. The bottom line is paid leave policies are good for businesses, their workers and the overall economy.

Kimberlee Leonard contributed to the reporting and writing in this article. Source interviews were conducted for a previous version of this article.