One of the key findings from our ‘Equality starts at home: paternity leave’ paper last year was that, while paternity leave is important in driving gender equality, we have very little data on parental leave policies at a company level. This information could provide key insights into the long-term talent pool within investible companies. That’s why we reached out to UK-listed FTSE 350 firms to gather data on their parental leave policies – maternity and paternity, limitations and business impact.
In this latest instalment of our research we present the findings of our ‘Survey of FTSE 350 companies’ parental leave policies’. Here’s what we found:
1) Chasm between maternity, paternity leave
Maternity leave is, unsurprisingly, much more generous than paternity leave. Almost all sectors provide at least 20 weeks of paid maternity leave – above the Statutory Maternity Pay (SMP) requirement – with only industrials, technology and consumer cyclicals offering less. Even then, the average is more than 16 weeks for these sectors. This contrasts sharply with paternity leave, where most sectors offer two weeks of paid leave in line with the minimum statutory allowance in the UK.
The financial sector stands apart as offering more generous paternity leave than any other sector, driven by a small number of companies that provide particularly generous paternity leave policies. When we exclude these outliers, average paternity leave allowances drop to the same levels as other sectors – highlighting how low the bar is set for paternity leave.
2) Drivers of leave policies
‘Talent attraction and retention’ are major drivers of leave policies in all sectors. This recognition that policies matter in building and maintaining a diverse talent pool is encouraging, but it’s not reflected in most companies’ policies.
‘Industry standards’ are also a major driving factor. This creates the potential for a virtuous cycle whereby firms competing in the same sector and talent pool become more generous with leave. However, there’s also a clear risk of industry standards creating a ‘doom loop’ in which leave policies are anchored, rather than boosted, by the industry norm. This is a particular risk for paternity leave.
‘Statutory regulations’ play a key role in setting a floor for parental leave. In the case of maternity leave, this ensures that women have a minimum of 39 weeks, with many companies choosing to offer full pay for at least part of that time. However, for paternity leave, the statutory minimum is only two weeks. More than 75% of companies surveyed only offer two weeks of paternity leave, with most companies highlighting statutory regulations as a reason.
3) Costs and benefits of policies
Companies highlighted the benefits in terms of employee retention and satisfaction, as well as to the general reputation of the firm – with more than half of firms reporting a moderate-to-major significance. This tallies with evidence that these factors also play a part in the determination of company leave policies.
On the flip side, the costs of covering for employees on leave was seen as the most noticeable negative impact – with 36% reporting a moderate-to-major significance. However, companies were still more likely to reference positive benefits rather than negative impacts, on average.
4) How are leave policies changing?
Almost a quarter of the firms surveyed reported that policies have not changed over the past five years; almost half are more generous; and a little under one third are significantly more generous. For those companies whose policies have become more generous, leave length – particularly maternity leave – is, on average, higher.
Existing generosity was cited as a key barrier to more generous policies. This is a cause for concern. While maternity leave policies may be considered relatively good in most companies, paternity leave allowances are very low. A shift in thinking is needed to recognise that two weeks isn’t generous. This is well below the seven weeks our modelling identified as the ideal minimum for dads, that would help boost female participation in paid work.
We hope to run this survey again in future to track how policy evolves.
5) Representation and leave policies
We combined the results of our survey with Bloomberg’s ESG metrics, and found tentative evidence that companies with more generous leave policies for men and women tend to have a higher proportion of women in their workforce.
We can’t confirm whether more generous parental leave leads to more women workers, or whether more women workers result in more generous policies. However our macroeconomic modelling suggests that better policies do boost female participation in the broader economy.
There’s also evidence that the share of women in the workforce is related to the broader corporate approach to parental leave. For example, those companies with a greater share of women in their workforce are more likely to list talent retention and attraction as a driver of leave policies, while those with lower representation are more likely to cite statutory requirements.
Why this matters
The logic of maximising human capital, regardless of gender, to ensure access to a high-quality labour supply against the backdrop of an ageing population, applies at the company level too. This survey suggests that more generous policies can bring benefits to firms in terms of reputational boosts, staff engagement and retention.
There’s also a key message for policymakers: the role that statutory requirements play in parental leave policies is clear. While progress has been made in expanding maternity leave allowances in recent decades, the UK lags behind in its paternity leave offering of two weeks (compared to an average of nine weeks across Organisation for Economic Co-operation and Development countries).
The positive benefits that paternity leave can have on female participation in the workforce suggests that setting the bar higher at the macro level could go some way in equalling the playing field for men and women, and shift incentives at the company level.