What Paid Leave for Hourly Workers Means for the Talent Economy

Walmart and other large employers recently announced expansions of paid parental leave to hourly workers. What does this mean for the talent economy?
Parental leave hourly workers

Following the new tax law, multiple large employers announced paid leave expansion to hourly workers.

Most notable is grocery retailer Walmart, which employs more than 1 million hourly workers. On January 11, the company announced base wages rising from $9 to $11 per hour, along with bonuses of $1,000 for eligible employees and expanding maternity and family leave. Hourly workers that clock at least 34 hours per week are eligible for 10 weeks of maternity leave or six week of parental leave. The six-week leave aligns with what salaried workers receive, according to the announcement from Walmart. Additionally, the company will help these workers with adoption expenses.

“Their expanded policy represents a sea change for the industry,” said Annie Sartor, program director at PLUS: Paid Leave for the United States, a nonprofit advocating paid family leave for all. “It’s parade worthy from my perspective.”

In the absence of federal paid leave policies, working families — salaried or hourly — face a difficult situation. “When you look at people who are in those sort of lower-wage, hourly, minimum-wage jobs, they have the least access. I would argue they’re the people who need it the most,” Sartor said. Companies such as Walmart and Starbucks moving to provide the benefit to hourly workers is critical. “I think the other large employers need to catch up.”

But how will providing hourly workers with paid parental leave benefits happen in practice? And what will it mean for the broader economy?

Vocalizing Value

Offering the same leave to hourly workers is an issue of fairness, said Judith Gordon, professor of management and chairperson of the Management and Organization Department at Carroll School of Management at Boston College. “It says, ‘You’re as valued and as valuable to us as salaried employees.’ ”

Historically, employers differ between hourly and salaried workers’ benefits because employees who are on an hourly schedule tend to be viewed as more transient, Gordon said. Also, unionization plays a role in benefits between these two groups, she said. If employing a unionized population, business leaders must go through the unions to negotiate benefits, which they tend to avoid.

RELATED: 10 Steps to Create a Paid Parental Leave Policy

By not distinguishing in policies between the two groups, the company can have a more unified and motivated workforce that feels valued. “The fact that this is happening I think is a really a positive sign of how companies are recognizing the real importance of their employees,” Gordon said.

These qualities of an engaged workforce lead to better work overall, no matter the status of an employee.

“I think that’s true whether you’re looking at a professional class or people who are working hourly wages,” said PLUS’ Sartor. Both groups would find it a lot easier to be present at their jobs “if [they] didn’t give birth two weeks ago,” she said. According to In These Times, a left-leaning magazine, 23 percent of working mothers in the U.S. go back to work within two weeks of giving birth; 12 percent take off a week or less.

Pros of Paid Leave

Companies can see returns on investment in providing paid leave to workers. In “Leaves That Pay,” a 2011 study about paid family leave in California, 87 percent of employers saw no cost increases. While this was a study of a paid leave in a state that provided partial pay to workers on leave, paid for through taxes, it acts as one business-friendly method for paid leave in the U.S.

Sartor listed other benefits to companies and the overall economy, including a reduction in the gender pay gap and improved retention and recruitment. “The costs are smaller than people think,” she said.

Challenges of Charting This Course

Despite these benefits, companies could deny workers hours to keep them in part-time status. In “The Haves and Have Nots of Paid Family Leave,” PLUS notes anecdotal evidence of Walmart and other large employers denying hours to keep workers out of the pool receiving benefits. Sartor said PLUS is keeping an eye on this and that underemployment, fair scheduling and fair hiring are important next steps in furthering the cause of paid family leave for hourly workers.

One fear keeping employers from providing paid leave for their hourly staffers is around cost, said Boston College’s Gordon. However, it shouldn’t be more costly than providing the same benefit to salaried workers, she said.

Another issue is how to determine what a full work week is for an hourly worker, Gordon said. Walmart defined full-time as 34 hours per week, but other employers could determine a different qualification. Also, if schedules vary week by week, with a single employee clocking 40 hours one week and 20 the following week, the status of full- or part-time could become foggy.

After determining if an employee qualifies for the paid parental leave, and they use it, the next challenge is getting them to return, Gordon said.

Finally, how work gets done while an associate is on family leave becomes another issue. Employees could feel resentful if they have to pick up the slack without an appropriate replacement to help out, Gordon said. Still, this is likely less challenging for large employers than for small.

Leave for Large Employers Only?

As seen with multiple large employers announcing paid family leave opportunities for hourly workers, these corporate giants must compete with one another through benefits and perks such as parental leave, salary, quality of work, flexibility, development opportunities and more, Gordon said. Small businesses simply can’t keep up.

“[Paid family leave] is just one more dimension for small companies,” she said. Employers operating on smaller scales have much less flexibility in terms of having an employee go on leave, taking on a temporary replacement and guaranteeing the hourly worker’s job upon return.

For example, if a small manufacturing firm has only 20 employees, it will be more difficult to schedule workers around a maternity leave than it would be for a large retailer with a much larger headcount. “It’s harder for small businesses to have the flexibility to offer these kinds of leave policies, that larger businesses have more slack in the system,” Gordon said.

Lauren Dixon is senior editor at Talent Economy. To comment, email editor@talenteconomy.io.