The recent amendment to the Maternity Benefits Act has more than doubled the maternity leave for female employees of private and public sector in Asia’s third largest economy, from the earlier 12 weeks to 26 weeks. However, the industry is skeptical about the long-term implications of the law and whether it will actually help or harm the cause of women inclusiveness in the workforce. Many of these apprehensions relate to the law impacting the employment for women, especially in the private sector.
With the government mandate of companies with more than 50 employees compulsorily facilitating a Daycare setup, many establishments are looking at this as an increased financial burden.
In many of the countries where similar laws have been passed, the government tends to subsidize these increased costs by splitting it between employers, insurance companies, the government itself along with its other social security programs. However in India, as per the current mandate, the entire cost is to be borne by the employer. Additional benefits of crèche for working mothers, a non-discriminatory performance appraisal system that acknowledges the female employees’ absence and work-from-home policies mean additional challenges for the company.
However, having recognized the challenges that come with this amendment, one also needs to consider that a company proactively complying with the new law and also going the extra mile to formalize a well-structured inclusion policy is better placed to attract & retain top talent. Corporate daycares for one are a proven method of getting women back into the workforce after their maternity leave. Yet, companies still avoid establishing them, citing financial, infrastructure and other constraints.
While there are financial costs to bear; one needs to question whether companies consider the benefits that may outweigh these costs. According to PricewaterhouseCoopers’ 2002 (PWC) Global Survey regarding “Effective People Management”, companies that involve in Employee-centric HR strategies like Employer-Sponsored Child Care report 35% higher revenues per employee.
Some of the aspects were having a high-quality corporate daycare setup along with a structured inclusiveness policy can provide a high ROI are as follows:
Turnover Costs: One of the primary reasons for women to leave the workforce is at the stage of maternity and the lack of childcare facilities available to them. From a corporate perspective, this means an increase in expenditure; from recruitment costs such as hiring expenses to costs borne in order to train a new candidate. The loss of productivity is another expense that cannot be overlooked. The time spent in the process of recruitment is the time that could be spent productively. Assuming that in a company that has about 7,000 employees, typically, half of these employees will have children in the age group of 1-8 years. Taking the average rate of attrition of around 15%, a turnover period of8 weeks and an average salary of Rs 60,000 for a mid-level employee, the turnover cost can be upwards of Rs 6 crore per annum.
Employee satisfaction, loyalty, and productivity: Companies that provide employees with the facility of having their children in the same location as themselves will see a higher employee satisfaction. A higher satisfaction rate translates directly into increased employee loyalty to their company. As these employees are given the opportunity to visit their children during the day, they should have less childcare-related stress. This reduction of stress will, in turn, lead to a higher employee productivity rate. This productivity has a direct, positive impact on company revenue.
Reduced cost of Absenteeism: Employees that do not have access to a daycare center in their workplace may be forced into missing work in order to remain home and take care of a child for lack of any other options. One estimate by the Child Care Action Campaign estimates that U.S. companies lose $3 billion annually as a consequence of child care-related absences. According to Emlen & Koren, 1984; Carillo, 2004, parents with children in age group of 1 -8 report average absenteeismof 9-12 days per year due to childcare breakdowns and related issues.
While at first glance the cost of providing a corporate daycare facility may seem steep, a cost-benefit analysis will show a firm that the benefits will far outweigh the costs in the long run. While participation from the government’s end to facilitate such services will be more than welcome, corporates should look at these as a long-term investment on their brand for the near future instead of only treating such initiatives as a cost burden.