Individual Americans are not alone in feeling financial pain and seeking tradeoffs as health care costs soar. Generous paid parental leave has become a top priority among employee benefits as employers look for ways to make cuts.
zoom communications has announced adjustments to its parental leave policy to bring benefits closer to market standards. A Zoom spokesperson said employees who give birth now receive 18 weeks of paid leave, up from 24 weeks previously, up from 22 weeks. Parents who have not given birth will receive a grace period of 10 weeks instead of 16 weeks.
Zoom isn’t the only company on the market scrutinizing more generous employee benefits. Further changes are expected as employers set budgets for 2027 and are concerned about rising healthcare costs. Some companies will see health care cost increases in the low double digits, said Rich Furstenberg, senior partner in Mercer’s medical practice. That’s where the CFO steps in and looks for areas where profits can be cut. “Everything is on the table then,” Furstenberg said.
He has received several requests from companies to adjust their parental leave programs, especially when their offer is more generous than what competitors typically offer. “If you can’t show why beating the market adds value, you’re going to be seen as fat in terms of showing numbers,” he says.
The change also reflects companies’ efforts to align more closely with a growing number of government-sponsored paid leave programs. Shawna Bringelson, senior vice president of Gallagher’s leave and productivity practice, said many parental leave plans have been in place for the past five to 10 years, so it’s natural for organizations to become more sophisticated as they gain experience with acquisition and costs.
“With state benefits expanding and many offering around 12 weeks of paid leave, companies are reevaluating how to adjust their programs. In many cases, policies in the 4- to 12-week range are emerging as a more sustainable balance that supports employees while maintaining operational consistency,” Bringelson wrote in an email.
To be sure, benefits consultants don’t expect companies to abandon paid parental leave programs. One reason for this is that it is an extremely important welfare benefit for working parents. “The idea that these policies are going to be repealed anytime soon is unlikely. With the level of prevalence of these programs that we’re seeing, and as valuable as they are, it would be really surprising to see them repealed. But they’re under scrutiny right now,” Furstenberg said.
The most generous benefits are offered first
Benefits experts say it’s easier to cut benefits when a company already offers more benefits than its competitors. For example, the Gates Foundation at one time offered 52 weeks of parental leave, but cut that to 26 weeks a few years ago.
National averages for paid leave vary by company size and other factors, but most companies don’t offer more than 12 weeks of leave, said JJ Jackson, director of national absenteeism and disability services at HUB International. “This is consistent with many mandatory national paid family and medical leave programs,” Jackson said.
Carrie Wootton, vice president of education at the International Employee Benefits Foundation, said it’s also worth noting that “even if reduced, parental leave benefits ranging from eight to 18 weeks remain relatively generous within the U.S. context.”
Because a relatively small number of employees take parental leave, the change may have limited impact on the organization. “In some cases, employers may evaluate how often employees use benefits when making adjustments,” Wootton wrote in an email.
Companies that have changed their paid leave programs said they continue to offer competitive benefits.
“Zoom is committed to the health of our employees and to providing support for new parents,” a spokesperson wrote in an email. “We regularly review our benefits to ensure they are aligned with the market and the long-term health and sustainability of our business. We remain confident that our overall compensation and benefits package (including our updated parental leave policy) remains competitive and on par with our peers.”
Business Insider reports that Deloitte plans to cut some key benefits for some employees in 2027. This includes reducing parental leave from 16 weeks to between half and eight weeks, and this change typically applies to employees in internal support roles such as management, IT support and finance.
A spokesperson told Business Insider that the company is “modernizing its workforce architecture to deliver a more customized experience that reflects the breadth of our professionals’ skills and service to our clients. Benefits are updated regularly and tailored for a smaller number of professionals to better align with the marketplace.”
Deloitte did not respond to CNBC’s request for comment.
Overall, the paid leave system has expanded.
While some companies are downsizing, others are considering expanding paid parental leave policies. A recent Brown & Brown survey of 1,241 U.S.-based employers with 200 or more employees found that 71% of respondents offer paid parental leave to birth and non-birth parents in excess of state requirements for some or all employees. Sixty-nine percent of respondents said they were increasing benefit rates or amounts. 60% are extending their benefits. Some of that has to do with changes in state law and some of it has to do with competitive pressures, said Chris Kenney, vice president of non-medical consulting at Brown & Brown.
Last year, Starbucks doubled paid time off for hourly employees. Currently, birth parents can take up to 18 weeks of fully paid leave, and non-birth parents can take up to 12 weeks of fully paid leave. Chairman and CEO Brian Nicol said in a public message that the changes were made after employees shared with the company concerns that the company’s leave policy for new parents, while generous, was not “adequate.”
“Maintaining competitive offers remains a priority as organizations continue to recognize that parental leave is a key factor in attracting and retaining talent,” Gallagher’s Bringelson wrote.
Laws at the state and federal level are factors.
Eligible employees are guaranteed up to 12 weeks of unpaid leave under the Federal Family and Medical Leave Act, but there is no federal paid leave program.
However, countries are moving to fill the gap. According to the Bipartisan Policy Center, which advocates for expanded access to paid family leave in the United States, 14 states and Washington, D.C., have mandatory paid family leave programs, and nine others have voluntary programs offering paid family leave through private insurance. Of those 24 paid family leave programs, 22 are in effect, excluding Maryland and Virginia, according to data from the Bipartisan Policy Center.
Emily Weelke, senior policy analyst at the Bipartisan Policy Center, said there is also growing bipartisan momentum at the federal level, which decides how to harmonize benefits between states or under the federal government. For example, in February the U.S. House of Representatives’ Education and Labor Subcommittee on Workforce Protection held a hearing on this topic. And last April, the bipartisan House Paid Family Leave Task Force introduced two bills to expand and improve access to paid family leave benefits.
Downturn in the job market presents opportunities for companies, but also risks
Certainly, cost is a key factor for many companies, especially now, and the job market is currently soft. However, WTW group benefits lead Alex Henry said before making changes to these types of benefits, employers should consider equity consistency, communication strategies and long-term workforce impact.
And the labor market pendulum can swing. “If these changes lead to a decline in trust, that could have really lasting effects,” Henry said. It can negatively impact your employer brand and send unintended signals about family-friendliness and inclusivity. “Changes can feel personal and disproportionate, which can increase reputational and retention risks,” he said.
Other benefits experts also urge caution when trying to cut paid leave programs. “We do not recommend scaling back this program because there is proven data that post-vacation attrition rates are low,” said HUB International’s Jackson. “In fact, there is a potential ROI in providing paid time off.”
