Financial Impact Maternity Leave

Goals

To determine the financial/business impact of female employees who do not return from maternity leave in the US. This information will help in supporting a new business to frame the problem their product is designed to solve.

Early Findings

  • The Federal Employee Paid Leave Act is a plan to give "federal employees 12 weeks of paid leave after birthing, adopting or fostering a child." It is expected to cost approximately $774 million in 2021, $817 million in 2022, and $846 million in 2023. However, it is estimated that the "program could save the government $50 million in reduced employee turnover costs and prevent the departure of more than 2,600 women from the federal workforce."
  • A recent article in Time, research conducted by the University of California Berkeley was cited which" found that, across industries, the average cost of replacing an employee was $4,000. The average cost of replacing a white-collar professional exceeded $7,000."
  • The article further states that "full-time female employees earned a median salary of $788 per week, in 2018" and that if "the overtime or temp-worker costs a business might incur in a new mom’s absence" were not taken in account, "providing her five weeks of 100% paid maternity leave or eight weeks of 60% paid maternity leave could end up being cheaper than losing her altogether."
  • According to Gallup, a conservative estimate of "the cost of replacing an individual employee can range from one-half to two times the employee's annual salary."
  • According to SHRM, each departure costs a business a third of that employee's annual income of which 33% are hard costs (recruiting, background checks, drug screens, temporary workers) and 67% are soft costs (reduced productivity, interview time, lost knowledge).
  • According to a CAP study, the turnover appears to vary according to the wage the employee earned. For high-turnover, low-paying jobs (less than $30,000 annually), the turnover is estimated to be 16% of the annual salary. For mid-range jobs ($30,000 - $50,000), the cost is 20% of the annual salary and for executive positions, up to 213% of annual salary.

Summary of Findings

  • During the initial hour of research, we focused on finding the turnover cost of maternity leave in the US.
  • We were able to find information on how much the government is saving by implementing maternity leave programs. With a saving of $50 million, this would imply that in 2021 the impact of maternity leave would have been $824 million ($50 million + $774 million).
  • Furthermore, we were able to find information on the cost of employees leaving a business.

Proposed next steps:

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