Health cost surge makes parental paid leave benefits a target for cuts

As healthcare costs soar, it’s not only individual Americans feeling the financial pain and looking to make trade-offs. Employers are scouring for ways to cut back and generous paid parental leave is among the employee benefits on the chopping block.

Zoom Communications announced tweaks to its parental leave policy to bring the benefit more in line with market norms. Zoom employees who give birth now have access to 18 weeks of paid leave, down from 22 to 24 weeks previously, a spokesperson said. Non-birthing parents receive 10 weeks from 16 weeks.

Zoom is not alone in scrutinizing some of the more generous employee benefits in the market. More changes can be expected as employers set their 2027 budgets and are seeing red over rising healthcare costs. For some companies, healthcare cost increases will run into the low double-digits, according to Rich Fuerstenberg, senior partner in Mercer’s health practice. That’s when the CFO enters the picture, looking for areas where benefits can be pared back. “When that happens, everything is on the table,” Fuerstenberg said.

He’s received a few requests from companies to adjust parental leave programs, especially if their offers are more generous than what competitors typically offer. “If I can’t show why being above market adds value, then it’s going to be considered fat from a show-me-the-numbers perspective,” he said.

The shift also reflects companies’ efforts to align more closely with state-led paid leave programs, which have increased. Many parental leave plans were implemented over the past five to 10 years, so it is natural to see refinement as organizations gain more experience with utilization and cost, according to Shauna Bryngelson, senior vice president of Gallagher’s absence and productivity practice. 

“As state benefits expand, often offering around 12 weeks of paid leave, companies are reassessing how their programs align. In many cases, policies in the four-to-12-week range are emerging as a more sustainable balance, supporting employees while maintaining operational consistency,” Bryngelson wrote in an email.

To be sure, benefits consultants don’t expect companies to abandon their paid parental leave programs, in part because it’s too important a benefit to working parents. “The idea that these policies are just going to go away is unlikely. At the level of prevalence that we’re seeing these programs, and as valuable as they are, I’d be really surprised to see them go away. But they’re under scrutiny now,” Fuerstenberg said.

The most generous perks are the first to go

It’s easier for companies to trim a benefit when they are already offering more than competitors, benefits professionals said. Gates Foundation, for example, at one point had a 52-week parental leave, which they trimmed a few years ago to 26. 

The national average for paid leave varies, depending on company size and other factors, but most do not offer more than 12 weeks, said JJ Jackson, national absence and disability practice lead at HUB International. “This aligns with a lot of mandatory state-paid family and medical leave programs,” Jackson said.

Carey Wooton, associate vice president of education for the International Foundation of Employee Benefit Plans, said it’s also worth noting that “even with reductions, parental leave benefits in the range of eight to 18 weeks remain comparatively generous within the U.S. context.”

Parental leave is used by a relatively small portion of the workforce, so changes may have a limited impact on the organization. “In some instances, employers may also evaluate how frequently a benefit is used by employees when making adjustments,” Wooton wrote in an email.

Companies that have altered their paid leave programs said they continue to offer competitive benefits.

“Zoom is committed to employee wellbeing and providing support for new parents,” a spokesperson wrote in an email. “We regularly review our benefits to ensure they remain aligned with the marketplace and the long-term health and sustainability of our business. We are confident our overall compensation and benefits package—including our updated parental leave policy— remains competitive and in line with peers.” 

Deloitte is reportedly paring back several key benefits for certain employees in 2027, including cutting parental leave in half to eight weeks from 16 weeks, according to Business Insider, with the changes generally applying to employees in internal support roles, such as admin, IT support, and finance.

A spokesperson told Business Insider that the company is “modernizing its talent architecture to provide a more tailored experience reflective of our professionals’ broad range of skills and the work they do serving our clients. Benefits are regularly updated and will be tailored for a small subset of professionals to better align with the marketplace,” the spokesperson said.

Deloitte did not respond to CNBC’s requests for comment.

Overall, paid leave offerings have expanded

Even as some companies are scaling back, others are considering boosting their paid parental leave offerings. A recent Brown & Brown survey of 1,241 employers with at least 200 U.S.-based employees found that 71% of respondents offered paid parental leave for birth and non-birth parents beyond state requirements for some or all employees. Of those respondents, 69% said they are increasing the benefit rate or amount; 60% are increasing the benefit duration. Some of this has to do with changing state laws, and some of it relates to competitive pressures, according to Chris Kenney, vice president of the non-medical consulting practice at Brown & Brown.

Starbucks last year doubled paid leave for hourly employees. Birth parents now receive up to 18 weeks of fully paid leave, and non-birth parents receive up to 12 weeks of leave at full pay. The changes came after employees shared concerns with the company that its leave policy for new parents, while generous, wasn’t “adequate,” Brian Niccol, chairman and chief executive officer, shared in a public message.

“Organizations still recognize that parental leave is a key factor in attracting and retaining talent, so maintaining competitive offerings remains a priority,” Gallagher’s Bryngelson wrote.

Laws at state and federal level are a factor

Eligible employees are guaranteed up to 12 weeks of unpaid leave under the federal Family and Medical Leave Act, but there’s no federal paid leave program.

States, however, have stepped up to fill the void. Fourteen states and Washington D.C., have adopted mandatory paid family leave systems, according to The Bipartisan Policy Center, which advocates for expanding access to paid family leave in the U.S. Another nine states have voluntary systems to provide paid family leave through private insurance. Of these 24 paid family leave programs, 22 have been implemented, according to the Bipartisan Policy Center’s data, with the exceptions being Maryland and Virginia. 

There’s also been bipartisan momentum at the federal level to determine how benefits can be harmonized among the states or under the federal government, according to Emily Wielk, senior policy analyst at the Bipartisan Policy Center. For instance, in February, the U.S. House Education & Labor Subcommittee on Workforce Protections held a hearing on the topic. And last April, the bipartisan House Paid Family Leave Working Group introduced two bills that would expand and improve access to paid family leave benefits.

Weak job market gives companies opportunity, but there are risks

Certainly, costs are a factor for many companies, especially now, and the job market is currently soft. However, before changing these types of benefits, employers should consider equity consistency, communication strategy and long-term workforce impact, said Alex Henry, group benefits leader at WTW.

And the labor market pendulum could swing. “If these changes lead to erosion of trust, that can really have lasting consequences,” Henry said. It can negatively impact the employer’s brand and send unintended signals about family-friendliness and inclusion. “Changes can feel personal and disproportionate, and that can increase reputational and retention risks,” he said.

Other benefits professionals also urge caution when attempting to cut back paid-leave programs. “I would not recommend trimming back this program because there’s proven data around lower post-leave attrition,” said HUB International’s Jackson. “There’s actually an ROI to providing paid leave.”