Canada recently expanded its parental leave policy, joining a growing list of benefit-friendly countries.
The Canadian policy is applicable for births on or after December 3, 2017. It gives parents additional flexibility and aims to provide better work-life balance for families. The main changes are:
- Maternal leave can now be taken up to 12 weeks before a baby is born or adopted (up from eight weeks under the previous policy).
- Parents now have two options for receiving parental-leave benefits:
- Standard parental benefits are paid at a weekly rate of 55 percent of the claimant’s earnings (up to a maximum amount) for up to 35 weeks, and can be claimed within a 52-week (i.e., 12-month) period. The two parents can share the 35 weeks of benefits.
- Extended parental benefits are paid at a weekly rate of 33 percent of the claimant’s earnings (up to a maximum amount) for up to 61 weeks, and can be claimed within a 78-week (i.e., 18-month) period. The two parents can share the 61 weeks of benefits.
There are two key controversies related to the new policy. For one, weekly amounts paid under the extended benefits have been greatly reduced. As a result, it may not be financially feasible for many families to take advantage of the extended period.
In addition, the new benefits are only available to 8 percent of the Canadian workforce. At this time, the changes only apply to workers in public service and federally regulated workplaces such as banks, transportation companies and telecoms. Given that most labor legislation is administered on a provincial level, each province must make similar changes for all Canadian workers to have similar benefits, and so far only Ontario has made a public commitment to do so.
Economics of Parental Leave
Studies have shown that generous paid leave increases the likelihood that workers will return to their jobs, improving productivity and saving businesses the expense of having to find a replacement worker, which in the US is estimated at 21 percent of an employee’s salary.
For parents, leave provides a respite from paying for child care. Costs in Canada are among the world's highest, though below those of the US and the top-ranked UK. With high costs and no leave policy in place, some workers don’t return for years, giving them less money to spend in the economy and lowering tax receipts.
According to an OECD report, most OECD countries provide maternity benefits and pay women over 50 percent of their earnings. Twelve countries pay 100 percent. Rates are lowest in Ireland and the UK — where only around one-third of gross average earnings are replaced by the maternity benefit — and in the US, which doesn’t have a federal parental leave policy. An international labor organization standard calls for maternity leaves of at least 14 weeks; the OECD average is 18 weeks. Paternity leave tends to be shorter, averaging eight weeks, with eight countries providing no leave and 13 offering two weeks or less.
Though the US does not have a national policy, some states and municipalities offer benefits. A new tax bill gives employers a tax credit for providing leave under the Family and Medical Leave Act. To receive the credit, employers will need to provide at least two weeks of leave compensated at 50 percent of employee earnings. The bill also gives a credit to businesses that provide leave to new parents in states that don’t require it, and expands a child tax credit for parents, doubling the amount to $2,000 for children under 17.
At the state level, California passed the first family leave program in 2002. The Center for Economic and Policy Research surveyed 253 employers and 500 individuals who participated in the California program and found positive results.
Support for parental leave is growing in the US. According to a Pew Research Center study, 82 percent of Americans support paid maternity leave and 69 percent approve of paid paternity leave. What Americans are divided about is who should pay for it, with 51 percent saying it should be a federal benefit and 48 percent saying decisions should be left to employers. California has been joined by New York, New Jersey, Rhode Island and Washington, as well as municipalities within some states in offering benefits.
Companies that plan to have a permanent establishment in the US should check locales they are interested in to determine policy.
Parental leave is widespread in Europe, and benefits in Scandinavia are especially generous. Sweden provides couples 480 days of leave for each child up to age 8, at 80 percent of the parent’s salary. The European Commission is currently mulling a proposal requiring members to pay parents the same amount for family leave that they pay for sick leave. Currently, the EU mandates four months of parental leave, but does not require parents to be paid. Labor groups have expressed disapproval of the proposed initiative, saying the measure would be burdensome for employers and would discourage women from returning to work.
In Japan, either parent is entitled to a full year off, and most women receive about 60 percent of their salary. Only 2 percent of fathers use the leave.
In China, new mothers get at least 98 days of paid leave, depending on age and locale, with an average range of 138 to 158 days. Paternity leave averages 15 to 30 days.
In Australia, parents get 18 weeks off paid at minimum wage by the government, but many employers provide additional benefits. However, the system is considered by some to be unfair and is currently under attack.
Mothers in Brazil receive 120 paid days off with a possible 60-day extension paid by the employer. The country recently quadrupled paternity leave from five days to 20 for companies participating in the 60-day extension program.
In Argentina, mothers are allowed up to 90 days’ leave, paid by their employer. Fathers get two days of paid leave.
In Mexico, mothers get 12 weeks off, 60 percent of which is paid by the government and the rest by the employer. Leave can be extended to six weeks at half pay. Dads get seven days, paid by the employer.
In general, parental leave is expanding, but it remains a hot-button issue around the world. Multinationals need to be vigilant in monitoring the legislation of countries where they employ workers.
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