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Impact of PFL on New York’s Small Businesses

By Richard A. White

New regulations often inspire focus on the small business community—and for good reason. It’s estimated that as much as one-half of the nation’s private sector labor force is employed by small businesses—those that employ less than 500 people and earn less than $7.5 million in annual revenue.1 As the backbone of many of New York’s communities, small business employers may be most impacted by new legislation like Paid Family Leave (PFL). In general, they also stand to be affected more than their larger counterparts, especially when it comes to interpreting and complying with new laws and regulations. We’ve already heard some common questions and concerns specific to the potential impact PFL may have on small businesses:

Will Day-to-Day Operations Change for Small Businesses?

The short answer to this question is that they shouldn’t—at least not dramatically.

PFL benefit amounts have been planned with a gradual rollout and year-plus lead time. This means there should be enough time to prepare, but it also means businesses will have to plan for changes to rates and benefits every year during the four-year rollout plan. Here are some things you should expect:

  • No direct PFL expense for businesses, as employee contributions will cover the premium cost.
  • Time to make adjustments with the extended rollout time frame.
  • Employers will need to plan for replacement help in anticipation of an employee’s leave, or potentially take on that workload themselves.

 Are There Any Benefits Small Employers Can Expect?

According to “A Better Balance,” a legal team advocating for paid time off and flexibility for American workers, PFL may stand to make small businesses more competitive with larger entities by leveling the benefits playing field.2 It’s anticipated that with PFL, small businesses may be as (or more) attractive to prospective employees, making competing for and recruiting talent much easier. In addition, small businesses may begin to see:

  • Reduced employee turnover.
  • Improved employee morale and loyalty.
  • Increased productivity.

A study recently conducted in California regarding its Paid Family Leave policy, which has been in effect for more than 10 years, showed that nearly 90 percent of employers reported that the PFL program has a positive effect or no noticeable effect on productivity.3 Ninety-nine percent of California businesses reported the same for employee morale.

What Additional Costs Could Small Employers Shoulder?

We know that smaller businesses with fewer employees are especially wary about PFL requirements, and with good reason. It’s a big concern to think about shouldering the workload of an employee for eight or 12 weeks, so we’ll do our best to make sure we’re available as a resource to help business owners navigate the new benefits landscape. As we wait to hear more about how PFL will be administered, it’s hard to say exactly what added costs small businesses may incur. However, we do know that it could:

  • Increase the amount employers pay overall for disability insurance. As more details are provided, we’ll update our site with the latest information, and have representatives standing by to answer questions and provide guidance.
  • Lead to misalignment with, or confusion around, how PFL will interact with the Family Medical Leave Act (FMLA). In effect, businesses will have two sets of guidelines to deal with: one on the state level and one on the federal level, and they’re not always in perfect alignment. Especially in the beginning, everyone will be figuring out these changes together, so we’ll provide all the resources we can to support small businesses as changes are implemented.
  • Impact how employers deal with employee replacement costs when employees are away on leave. Losing even one pivotal employee for a prolonged period of time can present a tremendous burden for small business owners. Since part of the idea behind PFL is to help small businesses, we’ll be on the lookout for additional offerings and resources to help manage the significant staffing issues this could pose for small business owners.

For more information and to stay in touch as details with the law are finalized, please go to www.newyorkpfl.com.

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1 https://www.dol.gov/wb/resources/workplace_flex_issue_brief.pdf
2 http://www.abetterbalance.org/our-campaigns/paid-sick-time/
3 http://www.abetterbalance.org/resources/paid-family-leave-in-other-states/

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Richard A. White is the CEO of ShelterPoint Life Insurance Company.  The opinions expressed in this article are his own.