Impact of parental leave on companies: taking time off to give birth has scant effect on small companies in Denmark

Abstract

Most of the existing evidence on the effectiveness of family leave policies stems from research on the impact on the families concerned – mothers, fathers, and their offspring – rather than the effects and costs on employers or fellow workers. By contrast, this policy brief examines the consequences of a female worker giving birth and taking parental leave on her employer and co-workers. Focusing on Denmark, a wealthy country with generous parental leave benefits, it shows there is little evidence of negative effects on either the employing company or co-workers. Output, labor costs, profitability, and company survival are largely unchanged. While co-workers experience temporary increases in hours, earnings, and the likelihood of retention, there are no significant alterations in their workplace well-being (as measured by sick days). This limited impact is due to most companies’ ability to compensate for parental leave by hiring temporary staff and raising other workers’ hours. Parental leave may, however, have negative effects on a small subset of companies who are less able to use existing staff to compensate.