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How to create a parental leave policy
Guides & how-to’s
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Here's how to build an attainable and commercially-viable parental leave policy for your startup.
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Guides & how-to’s

Startups are often known for their innovative work environments and quirky perks (insert ping pong table here). But research shows this isn’t what people really care about when it comes to employee benefits. Supportive, gender-neutral parental leave policies are a key driver of attracting and retaining top talent. 

And sure, there are plenty of gold-standard parental leave policies out there, but they’re often not attainable or commercially viable for an early-stage startup. 

*Please note, this article discusses pregnancy, miscarriage and stillbirth. We acknowledge that this content may be sensitive, and we encourage you to seek support as needed.

Why does this matter? 

There are several reasons why implementing a parental leave policy should matter to employers. In terms of attracting talent, 3 in 5 employers now offer paid parental leave in Australia, with the most common length of paid primary carer’s leave being between 7-12 weeks. Across the ditch, 45% of New Zealand employers offer something above the statutory entitlement. This means that whether you have a policy may impact your ability to attract staff, given most Australian employers and almost half of New Zealand employers offer parental leave. 

Parental leave policies are also impactful for retaining talent. In Australia, 77% of mothers return to the same job they left after parental leave. Plus, a major study of maternity leave and employee decision-making in the UK found that the more generous the pay for maternity leave, the higher the proportion of women who choose to return to work.

While a comparable study isn’t available for Australia or New Zealand, several examples from Australian organisations (that were among the first to implement parental leave policies locally) back this finding up, suggesting the results would be applicable:

  • Westpac introduced six weeks paid maternity leave in 1995. Following the implementation of this policy, the proportion of women returning to work from maternity leave increased from 32% to 53% in 1997. Today they have a more comprehensive policy, and see 96% of women returning to work.
  • AMP reported an increase in retention rates from 52% in 1992 to 90% in 1997, following the introduction of paid parental leave.
  • HP reported over 90% retention rate for staff returning from paid maternity leave.

The case for gender-neutral parental leave

Gender-neutral policies encourage more balanced child care roles, remove stigma from parental leave and flexible working, and reduce the gender pay gap. If those reasons aren’t enough, research shows that men want this. 85% of fathers say they would be “willing to do anything to be very involved in the early weeks and months of caring for the newly born or adopted child”, while 27% of fathers and partners have reported discrimination related to parental leave and return to work, despite taking very short periods of leave.

Beyond the numbers, having a child is one of the most life-changing experiences in a person’s lifetime. Companies can play a make or break role in how supported people feel in those early weeks and months. The personal benefits of parental leave for your staff is also reflected in improved health outcomes.

“Studies show that adequate parental leave can lead to lower infant mortality rates, increased breastfeeding rates, improved health outcomes for mothers and higher female labour force participation,” says Mary Wooldridge, Workplace Gender Equality Agency Director. 

When should you formalise a parental leave policy?

Implementing a parental leave policy typically isn’t at the top of a founder’s to-do list when starting their business, and there isn’t one “right time” to do it. The catalyst for implementing a policy is usually driven by:

  • Employee demand: Necessity is the “mother” of invention, and in many cases, an early-stage startup may not have a policy in place until there’s an expecting parent within the team.
  • Company growth: A company milestone, like a fundraising round, can trigger the need for a parental leave policy if increasing headcount is part of the plan to achieve the next goal. Employee benefits like parental leave become table stakes to attract talent to the business. 
  • Company maturity: As startups evolve and grow, they gain the resources and expertise through roles such as a Head of People, who can design and implement structured policies and benefits. 

Reejig introduced a paid parental leave policy in 2022 after its Series A round, offering its employees up to 12 weeks of Paid Parental Leave, paying the difference between the government's paid parental leave and the employee's current salary.

Mr Yum started developing their parental leave policy when the team was around 80 people. They launched the policy around the same time as they introduced a suite of new benefits. 

Open used to have a policy that provided top-up pay to the Australian government's statutory allowance, but recently did an update so it could exist as a standalone program and be relevant regardless of an employee’s region or the length of statutory paid and/or unpaid leave they elect to take. 

Building out your policy

While the aspiration may be to go from no policy to a gold standard policy, the reality for a startup is that it will probably take a few iterations to get there.

“Start small and build it up over time. It’s more fun to ratchet up than down,” says Grace Yao, VP of Operations at Reejig

“We take a values-led approach and regularly review our policy to ensure it continues to align with our values through different stages as we scale,” says Danielle Lee, Head of Legal at Open

“One of our big lessons was the power of simplicity when it comes to policies. Our policy hasn’t changed, but we needed to simplify the language; there was a lot of legal jargon, so we added a FAQ section to clarify points,” says Laura Sloane, VP of People and Culture at Mr Yum

When it comes time to write the policy for your company, there are a few factors you should consider, including what entitlements you want to offer, eligibility criteria and return to work support. Some examples below:

It’s also worthwhile considering whether you want to bake leeway into your policy for circumstances like a baby arriving early, peri and postnatal depression and whether you would consider an employee for a promotion or new role before or during their leave.

Here’s some suggestions for how you might think about layering on different entitlements over time:

Ultimately, there is no one-size-fits-all approach. It’s up to founders to work out the right balance of cost vs benefits over time. To give you a sense of the broad spectrum of policies and benefits across company stages, here are some examples of parental leave offerings from across the AirTree portfolio: 

Ok, but how much does it cost? 

While implementing a parental leave policy might appear to come with a daunting price tag, building a business case may prove it costs less than the recruitment costs you would otherwise face due to low retention.

A survey of over 1,500 HR professionals across ANZ found that, on average, it costs $34k to hire a new executive, $23k to hire senior-level managers, $17.8k for mid-level and $9.7k for entry-level positions. This means that implementing a parental leave policy may be a cheaper retention method than the costs to replace staff that would otherwise turnover without parental leave in place.

To help you work out the cost of a parental leave program, we’ve created a calculator, available for download at the top of this article. It’s a simple model, but it will help you account for various provisions you might consider including in a benefits program and how to forecast the cost of these as you grow. 

As you experiment with the calculator, here’s a few questions to consider:

  • What does a low, mid or high percentage uptake over the next 1-4 years look like? 
  • What are the different benefits you might offer at different stages of growth?  
  • Will you factor in a payback clause if someone doesn’t return or leaves soon after returning?

Also consider the following benefits, which will also have dollar savings in terms of attracting and recruiting talent:

  • Higher employee retention
  • Competitive advantage to attract talent
  • Higher employee engagement
  • Improved employer brand

Evolution

So you’ve got a policy in place; how do you measure success and improve? There are a few areas to consider.

Utilisation rates and demographics

Are you seeing equal uptake of your policy from mothers, fathers and parents? Are junior and senior staff, or tenured and newer employees using your policy equally? By identifying utilisation gaps, you can determine if targeted outreach or cultural changes to the policy are required.

Retention

Measuring the retention of employees post-parental leave is crucial to evaluating the impact of your policy. A positive trend in retention would indicate that your policy effectively serves and supports your employees, both during their leave and as they transition back to their roles. Conducting exit interviews with employees who leave after their parental leave will provide valuable insights into areas for improvement or gaps in your policy.

Level of connection

How much connection employees want while on parental leave varies greatly. To accommodate a range of preferences, provide options for different levels of communication to allow employees to decide what works best for them and set expectations before their leave commences. At a minimum, you should keep employees updated with important business news, and offer no-pressure invitations to team events so they can connect and catch up with their colleagues.

Actual vs forecasted cost

The actual costs of your parental leave policy can differ from your forecast based on unexpected changes to your payroll expenses, policy utilisation and parental leave cover costs. By analysing the data, you can gauge the financial impact and guide decisions on expanding or adjusting your policy to ensure a sustainable balance between employee support and business needs. 

Extra credit: Creating an experience

If you have capacity, holistically designing a positive parental leave experience from start to finish will do wonders for your company culture and retention. Some measures you could consider implementing:

  • Re-onboarding experience: Startups move quickly, meaning an employee’s role or team may not look or operate the same after their parental leave as it did before. Offering re-onboarding can help employees catch up on any significant changes and regain a sense of familiarity with the company.
  • Flexible return to work options: Returning to work after parental leave can be a big change. You can make the transition smoother for employees by offering options like temporary reduced days, part-time work, flexible working hours and work from home provisions.
  • Accommodations for cross-time zone collaboration: This one is especially important for global companies with teams working across different time zones. By adopting flexible work hour policies, you can accommodate the needs of new parents while allowing for collaboration between global teams.
  • Networking and community building: Connect parents within your team through a Slack channel or social events (outside of working parent crunch time!). Parent-friendly spaces (physical or virtual) encourage people to share stories and support one another.
  • Learning opportunities and resources: Providing access to learning opportunities, like retaining access to an L&D budget, while an employee is on parental leave can signal that you’re invested in their development as parents and professionals.

Useful resources

🤝 theSkimm #ShowUsYourLeave Database

🔥 Lenny’s Newsletter: How to create an exceptional coverage plan for your parental leave

💛 Workplace Gender Equality Agency’s parental leave guide and resources

🧑‍🤝‍🧑 Project F’s business case for equal parental leave

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