How Early-Stage Startups Can Offer Generous Parental Leave
As a startup founder, you’ve got a lot in common with a new parent. You’re both nurturing something wonderful but fragile; you’re both short on time and rest; and you’re both learning as you go.
Given your small team and negative bottom line, it’s tough to fund parental leaves. Yet given your employees’ needy new babies and sleep deprivation, it’s tougher for them to choose between their paychecks and children.
I’ve been on both sides of the picture recently, as a former VP of growth at an AI startup granting parental leave and as a new mom having just taken maternity leave myself, so I understand the struggle.
There are a lot of documented reasons why you should offer generous parental leaves: to create a healthy workplace culture, attract experienced talent, and retain employees, to cite a few.
Yet assuming you want to offer the best parental leave possible, how can you while minding your burn rate and runway?
I combed the web before sitting down with four startup founders and policy experts to gather thorough, actionable advice. In order to offer generous parental leave regardless of your company size or stage:
1. Take advantage of public assistance and private insurance
Do your research and get prepared
As the first step to creating your company policy, look at industry best practices. There’s some consensus that three to six months fully paid with benefits for all parents constitutes a generous parental leave. Lean on aggregate guides to further round out your research. Some great starting points are:
- TheSkimm’s database of parental leave policies
- The Paid Leave for the U.S. (PL + US) campaign’s clear resources and sample policy language
Janette Fong, Founder of Bisu Leave LLC, stresses the importance of researching your local laws and editing language when necessary, though. As an employment attorney once advised her: “One of the best ways to get sued is to take a copy of someone else’s policy since you don’t know under what regulations it was written.”
Leverage state-paid family and medical leave
Despite some positive policy momentum, the U.S. remains the only industrialized country to lack paid parental leave. The Family Medical Leave Act (FMLA) ensures that employees at certain organizations can take 12 weeks of leave without losing their jobs or health insurance benefits, but the government won’t pay for these leaves and there are company size and employee tenure requirements.
If you’re operating in the following states, though, you can fortunately take advantage of their paid leave laws:
These laws, which provide coverage for family caregiving and medical leave at large, will fund a percentage of your employees’ salaries while they’re away. After you figure out what exact percentage your state will fund, you can “top up” and pay the remaining salaries.
With these state programs, both birthing and non-birthing parents can get paid family leave for baby bonding while birthing parents can usually get additional paid medical leave through short-term disability.
For example, in Massachusetts, a full-time W2 employee and birthing parent can usually take up to 22 weeks of state-sponsored leave:
Sample leave timeline from Bisu’s Parental Leave Calculator
While helpful, state-paid leave programs are extremely confusing and hard to navigate because:
- Employees must apply for funding themselves.
- Every state has different rules (e.g., employees must apply before their due date in some states and after their child’s birth in others).
- States often make late payments, which can be stressful for your employees, especially given the expenses that accompany a baby.
- Some states may have specific red tape (e.g., employees accepting state-sponsored leave might not be able to send any work emails when they’re gone).
As the employer, you’ll have to confirm wages and notify the state of any private short-term disability plans you have. Suelin Chen, co-founder and CEO of Cake, recommends hiring a contractor to navigate the paperwork and process, saying, “It’s worth the cost.”
Allison Whalen, co-founder and CEO of Parentaly, suggests using a vendor such as:
Since these vendors are startups themselves, they might have discounted, startup-friendly pricing.
Beyond the different terminology across states and exhaustive paperwork, though, leveraging state funding for parental leaves has no drawbacks. As Janette says, “Use it, it’s already paid for!”
Purchase private group short-term disability insurance
In addition to government funding, you can also purchase private insurance to cover short-term disability for which pregnancy usually qualifies. While seed-stage startups might not be able to afford it, Janette recommends buying short-term disability once you have one employee request parental leave. According to Mary Paris, director of talent acquisition at PERSUIT, “PEOs (Professional Employment Organizations) are great starting points. PEOs handle benefits and payroll for small-to-mid-sized companies and take on some employment responsibilities.”
Two well-known PEOs are:
Janette recommends Sequoia One, which has partnered with Anthem Blue Cross to offer cheaper health insurance to small tech startups since their aggregate demographics skew young (and statistically more healthy).
You’ll need to talk with your specific PEO (or other benefits provider) to make sure that their short-term disability plan will:
- Cover pregnancy
- Provide additional funding to employees who claim state disability
If so, though, PEOs might help you merge state-sponsored disability insurance with their benefits, which would save you from hiring an additional vendor to complete that paperwork.
And if you’re not in a state that sponsors family or medical leaves, short-term disability plans are a no-brainer, assuming they’re within budget.
2. Conduct a cost-benefit analysis and get creative
Conduct a CBA with a caveat
Paid Leave for the U.S. (PL + US) and Parentaly offer CBA templates that show the overall business impact of different parental leave lengths based on the following costs and savings:
Despite these great tools, Allison emphasizes that it’s hard to conduct a true CBA around parental leave since it’s difficult to completely capture all factors. In general, Allison says the cost of making a bad hire or losing an exceptional employee far outweighs the cost of any parental leave:
“Making a bad hire is so much more expensive than paying for parental leave in the scheme of your startup, particularly in the early days. Hiring a poor fit can torpedo years of your business as compared to hiring someone who then takes three months that you were able to prepare for in advance, accelerating key milestones to accommodate. Parental leave pales in comparison to poor hiring. The important thing to ask yourself is not how long your leave should be, but if you’re getting the right people in-seat in the first place.”
Rather than fear parental leave, Allison says you should actually welcome and embrace it as it allows heads-down, in-the-weeds employees to return with fresh perspectives. Even though parental leave is anything but relaxing, it shifts an employee’s focus out of work and promotes a “positive forcing function.”
When Allison herself took parental leave previously, her pending absence made her decide on a major company strategic play that she’d been avoiding for months; that decision then accelerated her company’s growth by years. “Yes, parental leave is difficult and expensive, but it’s often a good constraint,” she said.
Mary also advises to zoom out and not overly subscribe to CBAs.
“We value and respect our employees as human beings. We want to support their full selves, not just the work they deliver. This means we support and celebrate life milestones such as raising children. To me, that alone supports the cost of such a program,” said Mary.
Yet for Mary, parental leave is not just a moral play but a business one, too. Mary reminds you that parental leave increases employee engagement and retention which in turn increases productivity and profitability.
Consider intermittent leaves
As an entrepreneur, you’re used to thinking outside of the box. Janette encourages you to get creative when crafting your parental leave, too. “Free your mind from what you think you should be doing and develop a plan that will work for your company specifically.”
One underused strategy worth exploring: intermittent leaves. Rather than take parental leave all at once, your employees could take different discreet leaves over longer durations. Assuming intermittent leaves cause less rather than more disruption to your business, they could look like:
- Employees take two months off and then intersperse their remaining leave.
- Employees take two weeks off every two months for up to a year.
- Employees take every Friday off for a certain amount of time.
Before implementing intermittent leave, keep in mind that:
- It only applies to family leave for baby bonding rather than medical leave for pregnancy recovery.
- It might not work if your insurance policy has a minimum duration.
Create a “phase back to work” program
“Phase back to work” programs, where employees can work part-time while still getting full-time pay to ease back into their routine without feeling overwhelmed, are on the rise. As reported by Parentaly, “According to a Sequoia Benefits survey of over 300 top employers primarily in tech and VC-backed companies, 42% of respondents reported that they had a ‘part-time or full-time ramp up’ period.”
Allison would love to see more creativity around these gradual re-entry programs. Parentaly compiled some examples of “phase back to work” programs at larger companies for inspiration:
According to Mary, though, if not implemented intentionally, these “phase back to work” programs can risk being sloppy. In order to maximize their impact, Allison recommends preparing for your employees return:
Allison also advises structuring these “phase back to work” programs simply and explicitly. For example,
3. Reorient and reorganize your company
No matter how early-stage your startup is, Suelin firmly believes that it should be operationally sound enough to handle parental leaves. Regardless of whether your employees need family leaves or not, you should always be putting processes and communication channels in place to ensure systematic, adaptable growth. According to Suelin, “If your company falls apart because one person is out for a few months then you haven’t actually built the right overarching infrastructure.”
While you may think creating a parental leave is a budgeting and backfilling play, Allison insists that it’s above all a prioritization exercise. When one of your employees goes out on parental leave, the overarching question you should ask is:
How can you shift your company priorities to ensure you still hit your goals?
When you run a nimble startup accustomed to pivoting, you’re more prepared for parental leaves than you may think. According to Suelin, “Parental leaves should not impact your budget. You make slight changes in timelines and put some slack into your roadmap and catch up later.”
Parentaly suggests asking your departing employee these questions to start:
- What are your most critical current responsibilities?
- Where will stakeholders go to understand who is on point for each?
- What are the top three things that have to happen while you’re on leave?
Don’t overcomplicate parental leave preparation. Allison advises then simply having your employee taking leave list out all of their job responsibilities. Then, go through these lists line by line to create a coverage plan:
While tedious, Allison insists this reprioritization is doable and healthy.
Level up and cross-train
Two demographics startups usually have in abundance are:
- Young employees
Parental leaves offer a prime opportunity to further level up and cross-train your organization.
Before burdening a senior employee or hiring a contractor to backfill a new parent, you should consider giving their work to hungry junior employees eager for more responsibility and recognition. Just be sure to remove some of their current, less critical tasks and compensate them for additional, more advanced contributions.
According to Janette, you’re bound to have some critical, specialty roles that will require formal backfills. For most standard roles, though, such as software engineers and customer success managers, prioritization and cross-training will suffice.
“Certain roles across engineering, product, and design are fungible. Since there’s usually more than one of these roles, they’re easy to backfill internally. Even if you just have one product manager, the CEO can always step in as the ultimate product manager,” says Janette. “These roles are cross-functional, too. A designer can do some product work and a product manager can take on engineering tasks. Flex your team.”
Allison points out the challenge of accommodating commission-based, relationship-driven sales roles, however. While you can easily outsource a business development representative (BDR), you can’t as simply replace an account executive or sales director. Most companies will split a rep’s territory among the sales team but that approach depletes a rep’s pipeline before she returns. Given these challenges, which Allison has thought about before, she recommends:
- Paying reps their full on-target earnings (OTE) while on leave.
- Providing ramp goals for reps when they return.
Gap-fill with contractors and speed up hiring timelines
For critical work that can’t be assumed by your current team, you can scope smaller projects for independent contractors through platforms such as Upwork or more fittingly, The Mom Project.
To maximize success, Allison recommends ensuring any contractor project has:
- A clear mandate
- A narrow scope of work
While you shouldn’t hire a full-time replacement for a new parent, you may want to accelerate hiring timelines for related or supplementary roles. For example, when Allison’s head of sales went on leave, she recruited sales reps earlier to minimize the impact.
Document to minimize disruption
By having your departing employees meticulously document their work before leaving, you can make it much easier to prioritize, transfer, and execute their tasks.
Starting ten weeks before leaving, employees should:
- Host training sessions.
- Have teammates shadow their activity.
- Introduce colleagues to clients.
- List out passwords and log-in information.
- Forward email histories.
To ensure documentation is thorough, encourage your employees to pretend like they’re gone already. When Allison did this a week before her induction, she realized she had not compiled a critical pitch deck.
Finally, ensure all of your employees are using all of your work management platforms (e.g., Salesforce, Asana, Miro) consistently and effectively to minimize disruption.
Join the larger social and political conversation
Since becoming a new parent, I’ve become much more efficient with my now limited time. When I do get a window away from my baby, I prioritize my obligations, eliminating the unnecessary and tackling the urgent with gusto.
As an entrepreneur, you’re equally adept at operating under constraints. After doing your research and getting private and public assistance, welcome parental leaves as a chance to not just reorganize your company but improve society at large. As Suelin puts it:
“Life happens. And people who work at tech startups aren’t immune to life,” she says. “Things come up for your employees that necessitate leaves, whether or not they’re parents. They may get sick, have to care for an elderly family member, or bereave a lost loved one. Treating parents and families at large with respect and valuing them in our society is good for everyone; it impacts everyone.”
Having founded a company, you’re a powerful voice in society. If you want to contribute to the broader political conversations around federal parental leave and childcare, here are some great starting points:
Note: PERSUIT is an OpenView portfolio company. For a full list of OV portfolio companies, visit our Portfolio page.