Health cost surge makes parental paid leave benefits a target for cuts
As healthcare costs soar, Americans aren’t the only ones feeling the financial pinch and looking to make compromises. Employers are looking for ways to make cuts, and generous paid parental leave is being cut from employee benefits.
Zoom Communication announced adjustments to its parental leave policy to bring the benefit more in line with market norms. A spokesperson said Zoom employees who give birth now have access to 18 weeks of paid leave, down from 22 weeks to 24 weeks. Parents who do not give birth are given 10 weeks out of 16 weeks.
Zoom isn’t alone in reviewing some of the more generous employee benefits on the market. Expect more changes as employers set 2027 budgets and move into the red rising healthcare costs. For some companies, healthcare cost increases will reach low double digits, according to Rich Fuerstenberg, senior partner in Mercer’s healthcare practice. That’s when the CFO steps in and looks for areas where benefits can be reduced. “Once that happens, everything is on the table,” Fuerstenberg said.
It has received several requests from companies to adjust their parental leave programs, especially if their offers are more generous than those offered by competitors. “If I can’t show why being above the market adds value, then from a show me the numbers perspective, it will be considered a great success,” he said.
This shift also reflects companies’ efforts to align more closely with increasing government-led paid leave programs. According to Shauna Bryngelson, Gallagher’s senior vice president of absence and productivity practices, many parental leave plans have been introduced in the last five to 10 years; so it’s natural to see improvement as organizations gain more experience with usage and cost.
“As government benefits expand, typically offering approximately 12 weeks of paid leave, companies are reevaluating the fit of their programs. In many cases, policies in the four to 12-week range emerge as a more sustainable balance that supports employees while maintaining operational consistency,” Bryngelson wrote in an email.
Of course, benefits consultants don’t expect companies to abandon paid parental leave programs; This is partly because this is such an important benefit for working parents. “The idea that these policies are going to go away is very unlikely. At the level of prevalence that we’re seeing these programs and when they’re this valuable, I’d be really surprised to see them go away. But they’re being looked at right now,” Fuerstenberg said.
The most generous privileges are the first to go
Benefits professionals say it’s easier for companies that offer more than their competitors to reduce a benefit. For example, the Gates Foundation once had 52 weeks of parental leave, but a few years ago they reduced this period to 26.
The national average for paid leave varies depending on company size and other factors, but most offer no more than 12 weeks, said JJ Jackson, HUB International’s national absence and disability practice leader. “This is consistent with many government-paid mandatory family and medical leave programs,” Jackson said.
It’s also worth noting that “despite the reductions, parental leave benefits in the eight- to 18-week range remain relatively generous in the U.S. context,” said Carey Wooton, vice president of education at the Foundation for International Employee Benefit Plans.
Parental leave is used by a relatively small portion of the workforce, so the changes may have a limited impact on the organisation. “In some cases, employers may also consider how frequently a benefit is used by employees when making adjustments,” Wooton wrote in an email.
Companies that have changed their paid leave programs said they continue to offer competitive benefits.
“Zoom is committed to employee well-being and providing support to new parents,” a spokesperson wrote in an email. “We regularly review our benefits to ensure they remain aligned with the long-term health and sustainability of the market and our business. We are confident that our overall compensation and benefits package, including our updated parental leave policy, will remain competitive and in line with peers.”
Deloitte will reportedly roll back some key benefits for certain employees in 2027; This includes halving parental leave from 16 weeks to eight weeks. Business ContentThe changes will generally apply to employees in internal support roles such as admin, IT support and finance.
A spokesperson told Business Insider that the company is “modernizing its talent architecture to provide a more customized experience that reflects the broad skills of our professionals and the work they do serving our clients.” The benefits are updated regularly and will be tailored to better fit the market for a small subset of professionals, the spokesperson said.
Deloitte did not respond to CNBC’s requests for comment.
Paid leave offers increased overall
While some companies are scaling back, others are considering increasing their paid parental leave offerings. A recent Brown & Brown survey of 1,241 employers with at least 200 U.S.-based employees found that 71% of respondents offer paid parental leave for some or all employees beyond state requirements for birth and prenatal parents. 69% of respondents said they increased their benefit rate or amount; 60% increase the duration of assistance. Some of this has to do with changing state laws, and some has to do with competitive pressures, according to Chris Kenney, vice president of Brown & Brown’s nonmedical consulting practice.
Starbucks doubled its paid leave last year for hourly workers. Biological parents can now receive up to 18 weeks of fully paid leave, while non-birth parents can receive up to 12 weeks of fully paid leave. The changes came after employees shared concerns with the company that its leave policy for new parents, while generous, was not “adequate,” chairman and chief executive Brian Niccol said in a public message.
“Organizations still recognize that parental leave is an important factor in attracting and retaining talent, so maintaining competitive bids remains a priority,” Gallagher’s Bryngelson said. he wrote.
Laws at the state and federal level are a factor
Eligible employees are guaranteed up to 12 weeks of unpaid leave under the federal Family and Medical Leave Act, but there is no federal paid leave program.
But states have stepped up to fill the gap. Fourteen states and Washington D.C. have adopted mandatory paid family leave systems, according to the Bipartisan Policy Center, which advocates for expanded access to paid family leave in the United States. Nine other states have voluntary systems to provide paid family leave through private insurance. According to data from the Bipartisan Policy Center, 22 of those 24 paid family leave programs have been implemented, with the exceptions of Maryland and Virginia.
There is also bipartisan momentum at the federal level to determine how benefits can be aligned across states or under the federal government, according to Emily Wielk, senior policy analyst at the Bipartisan Policy Center. For example, in February, the U.S. House of Representatives Subcommittee on Education and Labor Workforce Protection held a hearing on the issue. Last April, the bipartisan House Paid Family Leave Task Force introduced two bills that would expand and improve access to paid family leave benefits.
The weak labor market offers companies opportunities, but there are also risks
Of course, costs are a factor for many companies, especially now and the job market is soft right now. But WTW group benefits leader Alex Henry said before changing such benefits employers needed to consider equality consistency, communications strategy and long-term workforce impact.
And the labor market pendulum may swing. “If these changes lead to an erosion of trust, that could have really lasting consequences,” Henry said. It can negatively impact the employer’s brand and send unwanted signals about family friendliness and inclusion. “Changes can feel personal and disproportionate, increasing reputational and retention risks,” he said.
Other benefits experts also advise caution when trying to reduce paid leave programs. “I wouldn’t recommend shortening this program because there is proven data that post-furlough attrition is lower,” HUB International’s Jackson said. “Providing paid leave actually has a return on investment.”
