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Updated Mar 23, 2023

Why Offering Paid Leave Is Good for Your Business

Although you may not be legally required to offer paid time off, it tends to be a standard employee benefit. Learn how offering paid leave can benefit not only your employees, but also your business.

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Skye Schooley, Senior Lead Analyst & Expert on Business Operations
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Paid leave policies may represent an additional cost, but the benefits they provide pay for themselves and then some. Research has shown that offering paid leave is not only advantageous to the employee, but also for the employer and the overall economy. While budgetary-minded business owners might initially be wary of the additional expenses on the balance sheet, the numbers show that paid leave is a financially sound decision. If you’re on the fence about offering paid leave, check out some of the business advantages you’ll experience by doing so.

What is paid leave?

Paid leave is when an employee takes time off work and is still compensated. There are several types of paid leave, such as vacation time, holiday time, sick leave, bereavement leave, sabbaticals and more. 

Whether or not an employee is paid for time off, and what activities constitute paid leave, is often up to the employer’s discretion. However, paid leave must be paid fairly, per anti-discrimination laws and regulations.

Why is offering paid leave good for your business?

Although you might not like paying employees for not working, paid leave can be advantageous to your business. Here are a few reasons why paid leave is good for business.

1. Enhanced employee recruitment

Flexible benefits have become popular among younger workers, especially benefits like flextime, remote work, and – you guessed it – paid time off. At the very least, you should offer some form of paid time off to stay competitive when recruiting employees.

“We’re in a time where workplace policies need to keep up with the realities of workers and their families,” said Karen White, former director of public policy and analysis and community engagement at the Center for Women and Work at Rutgers University. “Workers are paying attention to the kinds of benefits they’re being offered when they consider new jobs.”

In other words, if you want to bring on the best talent available, you need to meet their demands for good compensation and benefits, like paid leave. To attract the best employees, you can even take it one step further by offering unlimited PTO. A MetLife study found that 70% of employees are interested in unlimited paid time off, yet just 4% of employers offer it. This puts you at a major recruitment advantage by providing it.

The thought of offering unlimited PTO sounds scary, but it’s not. The term isn’t literal – your employees still have to work – but it gives them the freedom to take time off when needed. Of course, that time off will need to be approved by their manager, so you won’t be left understaffed during your busy season.

Did You Know?Did you know
Research from Namely points to the fact that unlimited PTO policies tend to result in many employees taking less time off than they would if they had a standard PTO policy.

2. Improved workplace health and safety

Creating a safe and healthy workplace is an essential responsibility for every employer, and paid leave can help you accomplish that. A sick employee with paid leave will feel comfortable staying home instead of coming to work and potentially infecting others or possibly getting injured on the job.

“Presenteeism is when people go to work sick and cause public health issues,” said White. “And the fact is that if people were able to take the time to stay at home and take care of themselves [with pay], this would not happen as often.”

The National Partnership for Women and Families estimates that presenteeism costs the United States more than $1.1 billion annually in preventable emergency room visits among workers without paid sick days. This can be avoided or reduced by incorporating paid sick leave policies in company budgets.

3. Greater productivity

A major benefit of implementing paid leave policies is improved productivity. For example, workers who would otherwise come into work sick – either because of a need to make money or fear of losing their position – are free to stay home, which protects the rest of the workplace from infection. The spread of an infectious disease can have a devastating effect on productivity.

On the family leave side, many employers already offer family leave, even if they are not required to do so by law. However, many small businesses do not extend paid leave to their employees. When workers have the security of knowing they won’t lose out on pay due to caring for a newborn or another family member, they tend to be less stressed in the workplace and more focused on their assigned tasks. According to the National Partnership for Women & Families, this can lead to reduced mistakes and increased overall productivity.

“A happy, more satisfied employee who is not stressed out about family care issues is much more able to focus on doing a better job,” White said.

FYIDid you know
When employees are free to take paid time off to focus on their mental health, they can return to work refreshed and ready to be productive.

4. Heightened employee morale

By offering paid leave, companies are promoting a healthier work-life balance, which also contributes to the aforementioned stress reduction that translates into increased employee morale. When employees come into work refreshed and optimistic, their positivity can radiate through your office and impact others. This can help improve your overall employee morale and company culture. Additionally, paid leave is a great signifier to your staff that you care about them and want them to be happy and healthy.

5. Increased employee retention

Not only can paid leave policies help you attract new talent, but they can also help you retain them as well. If you offer a paid leave program and boost retention rates, your company can avoid losing workers you’ve already substantially invested in and who know how the workplace operates.

“We did research on women in law firms, and what we found was that law firms invest an enormous amount of time and resources in hiring and training new attorneys, but if they don’t provide paid family leave, when female attorneys go off on maternity leave, they are less likely to return,” White said. “So off goes all those training dollars, time and resources invested in that person.”

If you care about employee turnover and long-term business success, you’d be wise to offer paid leave. Business owners reap the rewards of providing their employees with what they need, whether those rewards take the form of improved employee retention or heightened productivity.

Is paid leave mandatory?

Yes and no. No federal law requires United States businesses to offer employees paid leave, but some state laws may require paid sick leave. For example, New Jersey requires employers of all sizes to provide full-time, part-time, and temp employees with up to 40 hours of earned sick leave per year. This applies to almost all employees in New Jersey, and the sick leave can be used to care for themselves or a loved one. Brush up on all state or local laws that apply to you and your staff.

FYIDid you know
Just because you don't have to offer paid leave, doesn't mean you're off the hook for unpaid leave. The Family and Medical Leave Act (FMLA) is a federal law that requires some employers to provide eligible employees with up to 12 weeks of unpaid leave per year.

Employers should think twice about foregoing paid leave just because it is not legally required. While paid leave does represent an expense, consider it more of an investment than a simple expense. The bottom line is paid leave policies are good for businesses, their workers and the overall economy.

Some source interviews were conducted for previous versions of this article.

author image
Skye Schooley, Senior Lead Analyst & Expert on Business Operations
Skye Schooley is a dedicated business professional who is especially passionate about human resources and digital marketing. For more than a decade, she has helped clients navigate the employee recruitment and customer acquisition processes, ensuring small business owners have the knowledge they need to succeed and grow their companies. In recent years, Schooley has enjoyed evaluating and comparing HR software and other human resources solutions to help businesses find the tools and services that best suit their needs. With a degree in business communications, she excels at simplifying complicated subjects and interviewing business vendors and entrepreneurs to gain new insights. Her guidance spans various formats, including newsletters, long-form videos and YouTube Shorts, reflecting her commitment to providing valuable expertise in accessible ways.
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