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Why Paid Family Leave Is a Benefit to Small Businesses

Amy Traub

Under New York’s proposed paid family leave law, businesses won’t pay anything for the new family leave benefit. The program would be funded entirely by a small payroll deduction from each worker in the state. An insurance provider will pay the benefits out to workers.

It’s certainly not the most progressive way to fund a new public benefit, but one thing it’s not is a burden on businesses.

In fact, it’s a benefit.

As David Bolotsky, CEO of the Brooklyn-based small business Uncommon Goods, wrote in a recent op-ed:

Anyone who runs a business knows that their most valuable asset is their team. Losing good employees is costly. Just hiring and training a replacement can cost thousands, not to mention the lost productivity when the position is unfilled. Furthermore, not offering benefits like paid leave makes it more difficult to attract and retain capable employees… we’d like to see paid leave be the law of the land. That’s why we support legislation that would expand paid family leave to all American employees. Some in Congress say that it would place an undue burden on business. Our experience shows the opposite: Paid leave is a wise investment, both for businesses and the country.

The experience of states that have enacted paid family leave backs Bolotsky up. Consider California, which was the first state to establish a paid family leave system in 2002.

In a survey of California businesses conducted by the Center for Economic Policy Research, 91 percent of companies with fewer than 50 employees reported the paid family leave law had no negative effect on the company’s profitability and performance.  88.8 percent said the law had no negative effect on employee productivity. Overall 87 percent of California employers say they experienced no cost increases associated with the law, while 9 percent say their costs were reduced, often when the company shifted from running its own paid leave program to the public system.

A key business benefit that emerged in California was the same trend Bolotsky identifies: the powerful effect on employee retention. Use of paid family leave greatly increased the likelihood that workers would return to the same employer after leave. The effort to retain valued employees is a key reason some of the nation’s most dynamic companies—most recently New York-based Etsy—have dramatically enhanced their provision of paid leave. Yet left to themselves many small businesses are unable to offer the generous paid leave benefits some bigger firms provide, putting them at a disadvantage when it comes to attracting and retaining workers.

With no cost to companies and substantial benefits, business leaders have spoken out in support of paid leave in New York. The politicians now calling to exclude small companies—and their employees—from a system that functions best when it is universal should listen to voices like Bolotsky's and ensure that everyone can participate in New York's paid family leave system.