For some working parents, taking parental leave may mean losing out on an annual bonus

Finding out your annual bonus has been prorated when you come back from maternity leave isn’t exactly a warm and fuzzy way to welcome moms back to the office. But for many, it’s a surprise financial hit for taking advantage of their company’s paid leave policy. 

There is no federal mandate for paid parental leave—and just 11 states have laws in place around paid family leave, according to the Center for American Progress. That means it’s really up to your employer to decide how much parental leave you can take—and how much you will (or won’t) get paid for the time. 

While some companies may present a generous-sounding maternity leave policy, many new parents are surprised to find out that they’ll see reduced earnings from being out on leave to bond with their babies and heal from birth. This can come in the form of having to take fully unpaid leave, partially paid leave or even having an annual bonus prorated for the time you’re out.

Prorated bonuses after parental leave: ‘It feels so unfair’

Marissa (last name withheld to protect her privacy), who works for a large Fortune 500 company, shared with Motherly that her company promotes a 20-week maternity leave policy but it felt a bit “smoke and mirrors” when she started to understand the financial impact going on paid leave would have.

Her company paid a few weeks at 80% of her salary and then the rest of her leave, she said, was a combination of short-term disability for 6 weeks and using her state’s FMLA policy for 12 weeks. 

On top of that, she came back to find that her annual bonus would be prorated for the time she was out. 

“It feels so unfair and almost like punishment,” she says, noting that she lost about $24,000 in total compensation from using the full maternity leave policy and having her bonus cut. 

Research supports the fact that providing paid parental leave has a lasting positive impact for moms, babies and companies. Studies have shown that paid parental leave increases employee satisfaction and can actually help increase profits for a business, but currently only 12% of women working in the private sector have access to any sort of paid parental leave.

“The purpose of providing paid parental leave is to give employees financial stability as they expand their families,” Jenna Vassallo, Head of Brand & Marketing at Parentaly, explains. 

Vassallo knows too well the surprise hit of losing out on an annual bonus because of parental leave. At a former position, she came back to work to be told that HR had “accidentally” paid her her full bonus, and that she’d need to pay it back.

More progress is needed in supporting working parents

Prorating bonuses because of maternity leave doesn’t make sense for employers who are looking at the big picture, she says, especially when paying 12 to 16 weeks for parental leave is a “tiny blip in time” in the grand scheme of things. She ended up leaving that role because she didn’t feel supported as a working parent.

“By prorating, it could make employees feel they’re being penalized for using their parental leave benefits.” 

It’s not as if the results from your work simply vanish when you go out on maternity leave. A senior management employee at a major retailer who prefers to remain anonymous shares that before she went out on leave, she went to copious lengths to ensure that everyone on her team was set up for success while she was away. But she was still faced with a prorated bonus upon her return. “Prorating the bonus for that period pretends that my work in lead up, and the execution of my strategies/initiatives during my absence by my team and others, were not of my making. This is absolute nonsense. It pretends that just in those very specific weeks I was on mat-leave I was to be treated as an on-the-clock [employee] earning my salary for minutes worked instead of for goals achieved.”

Sam, who works in tech, and Susie, who works in hospitality technology, had similar experiences. They both were surprised to find out that their annual bonus was being prorated when they were getting their performance reviews.

For Sam that meant losing about $6,000 for the year. For Susie, whose bonus is a significant chunk of her compensation package, it meant forfeiting nearly $17,000. 

“I wish they would be proactive in making sure women aren’t earning less because they have a baby,” Sam says, noting that her boss never told her that her bonus would be prorated because of maternity leave.

“I know companies are about the bottom line,” Susie adds, “but if you’re trying to attract and retain women in the workplace that’s something you shouldn’t do—you shouldn’t prorate bonuses.”

Sending the right message

Companies have a choice in how they treat new parents, and a choice in the message they want to send for how much they value a new parent in the workplace. It’s disheartening that so many instead opt to reduce impact on their budget, which means employees having a baby are left with the fallout of extensive financial damages. 

“[When companies do this] it just continues to create pay inequity and career advancement differences between women and men,” a mom who preferred to remain anonymous tells Motherly. She also experienced a prorated bonus and reduced pay the year she took parental leave. “There is literally no choice as to who will be carrying and birthing the baby.”

In contrast, companies offering fully paid parental leave and who don’t dock annual bonuses as a result of being out on parental leave send a strong message of support to their employees. It’s a choice that can offer dividends long term with higher employee satisfaction and retention, and can help offset the motherhood penalty.

Zocdoc is one of those companies. They’ve chosen not to prorate bonuses while team members are out. “Our mission is to give power to the patient, and it is critical to use that our benefits and policies reflect that,” said Jess Aptman, Chief Communications Officer. “We want to empower new parents to take the time to care for themselves and their families without having to worry about any negative consequences.”

Bringing a child into the world is a happy moment and cause for celebration—and is already expensive enough without factoring in the financial downsides that most women experience by taking parental leave. It’s time for companies to take a look at their paid parental leave policies and to make some much-needed changes.

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