Report on the more equal distribution of the parental leave costs

Abstract

This report examines the distribution, compensation, and equalization of the costs of parenthood for employers in Finland and its comparison countries – Sweden, Norway, Denmark, Iceland, and Estonia, and also makes recommendations based on the comparison to promote a more even distribution of the costs of parenthood. Parenthood-related costs refer to both direct and indirect costs incurred by an employer due to an employee’s parenthood.

The study found that in Finland and the comparison countries, the costs borne by employers due to parenthood vary depending on the country. Statutory parental leave benefits are generally financed through public funds, but individual employers are left with varying costs, especially due to the full wage payment based on collective agreements or the supplement paid on top of parental allowance, as well as absences related to pregnancy and caring for a sick child. These costs are only partially reimbursed from public funds. In some countries, these direct costs of employers are compensated more effectively. In Denmark, there are parental leave imbursement funds in which all employers participate and from which the wages paid by employers during the leave are almost completely reimbursed, and in Sweden, allowances paid on top of parental benefits in LO-affiliated sectors are covered by an insurance system. In Finland, a €2,500 parental leave compensation is available to employers of mothers, helping to offset some costs. This type of compensation does not exist in the comparison countries. Additionally, in many comparison countries, the costs of statutory parental benefits are financed through social security contributions collected from all employers, which helps equalize costs between male- and female-dominated sectors.

An analysis of statistical data shows that mothers still take the majority of parental leave in all comparison countries. Consequently, both uncompensated direct costs and indirect costs burden more organizations that employ women.

The report suggests that one way to balance costs would be to increase fathers’ share of parental leave, for instance, by extending leave quotas specifically reserved for fathers. In addition, Denmark’s parental leave imbursement funds and Sweden’s jointly agreed insurance system for additional parental benefits in LO-affiliated sectors offer examples of mechanisms that distribute the direct costs of non-statutory expenses, such as full wage payments during leave, among employers. Another option to compensate for employer-borne costs due to collective agreement obligations would be to increase the reimbursement level of parental allowances, which would reduce the gap between full wages and parental benefits. The report also recommends that measures at the workplace level are needed to reduce indirect costs, and here, good practices developed in the organization of work and substitute arrangements play a key role.

• ISSN: 2984-3308 (Online)
• ISBN: 978-952-209-223-6 (Online)
• JEL: J13, J32, H55
• Press Release in Finnish
• Publication in PDF-format