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Ikea pushes retail into the race to expand paid leave

Ikea employees cheer the grand opening of New York City's first Ikea store, in Brooklyn, in 2008. Its new paid leave policy is among the most expansive in the retail industry. (Mark Lennihan/AP Photo)

Sweden is well known for its generosity when it comes to paid family leave, granting new moms and dads a jaw-dropping 480 days of parental leave. But until now, U.S. workers at one of the country's best-known brands, Ikea, got relatively little time off when a new child was added to the family.

That's set to change in January when the flat-pack furniture mecca will begin offering a much broader and longer paid time off policy for all of its U.S. employees. The change, announced Tuesday, is the latest sign that companies outside the benefits-flush technology and finance sectors are seeing paid family leave -- which got attention from both parties during this year's election -- as a way to take care of existing workers or attract and retain new ones.

New parents who work in Ikea's U.S. corporate office and its stores will be eligible for up to four months of paid or partially paid time off after meeting certain tenure requirements. The policy is unusually expansive for the retail industry, say experts on family leave benefits. For one, unlike companies in the technology or consulting industry that have adopted luxe benefits to help attract more millennial engineers or MBAs to their ranks, retailers require less competitive skills.

Hilton offers paid parental leave to all employees, including hourly workers

"In the United States, retail has, for a lot of reasons, tended to see employees as more interchangeable and to provide less flexibility, including for family leave," said Ellen Galinsky, president of the Families and Work Institute, a nonprofit research center.

In addition, Ikea's policy covers not only full-time and part-time workers but offers expansive coverage to fathers, adoptive and foster parents. Katie Bethell, executive director of PLUS, a nonprofit advocacy group for paid family leave, says their research shows that while some national retailers offer six to eight weeks of paid leave for new birth mothers, "it’s really a step forward to be extending that kind of leave to dads and adoptive parents," Bethell said. 

After a year of service, Ikea's benefit will offer new parents in the U.S. six weeks off at full pay and six additional weeks at 50 percent pay. After three years of service, the benefit will grow to eight weeks off at full pay and eight additional weeks at 50 percent pay. Birth mothers can receive additional weeks off through short-term disability programs, with the number depending on the type of birth. (Up until now, beyond federally mandated protections under the Family Medical Leave Act, Ikea had offered birth mothers short-term disability leave and just five days of parental leave for mothers and other parents.)

The benefit provides a paid perk that just 7 percent of private industry workers in service jobs are eligible to receive, according to figures from the Bureau of Labor Statistics. Meanwhile, 24 percent of workers in management, professional and related occupations had access to paid family leave.

Ikea's benefit also adds an unusual wrinkle to many standard parental leave plans, with the benefit growing in length after employees stick around longer. At most employers, parental leave programs are standard once employees initially qualify. "It's interesting to see companies experimenting with different models," Bethell said. "That seems to reflect viewing parental leave as a retention strategy that’s on the table."

That sort of design is particularly relevant in an industry where turnover is high. Data from the Bureau of Labor Statistics puts annualized turnover among retail employers at 54 percent. Ikea U.S. human resources manager Nabeela Ixtabalan said its own turnover rate is lower, at 29 percent, and that average tenure for its workers is 5.4 years. 

In an interview, Ixtabalan said that the company "absolutely" sees the new policy as a way to help retain workers and could help save with hiring, recruiting and training costs. But, she says, "the starting point is different. Other industries are offering these enhanced benefits to be more competitive. We have taken it from 'what do we need to have a healthy and safe workforce?' "

The move comes as many large companies, particularly in the technology and finance fields, have expanded their programs in recent years to attract and retain younger workers -- particularly those with harder skills to find, such as engineering or computer science. Ikea, meanwhile, joins a slow but growing number of companies who employ workers outside of such high-demand fields but are expanding family friendly benefits for workers.

Ikea workers are getting another raise

Earlier this year, Hilton said it would give two weeks of paid leave to all new parents, and 10 weeks to birth mothers, a decision that was highlighted for including hourly workers like housekeepers and front desk clerks. In early October, Chobani said it would offer six weeks of paid family leave to all of its 2,000 workers, many of them factory workers. Soon afterwards, Levi Strauss & Co. said all hourly and salaried U.S. employees with benefits, regardless of gender, would be offered up to eight weeks of paid parental leave.

During the election talk heated up about paid family leave. President-elect Donald Trump has proposed ensuring birth mothers receive six weeks of paid maternity leave. Ixtabalan said "a lot of businesses would agree we have to be ahead of those legislative approaches," but noted "that's not driving our decision-making. What's driving it is expectations of employees on their employers."

In recent years, Ikea has rolled out other employee-friendly benefits such as a company minimum wage set to local living wage standards, according to a calculator by MIT researchers. It also announced Tuesday it would institute an unpaid sabbatical for long-term employees.

Family leave advocates warned that while expansive benefits are a positive move, research has also shown that hourly paid workers can't easily get by on 50 percent wages, and often won't take advantage of that part of a benefit. "It may have unintended consequences for low-wage or hourly employees," Bethell says.

For many, 50 percent pay may not be "sufficient for them to be able to use the leave." Ixtabalan says Ikea considered that issue when designing the perk and lets workers supplement the partial pay period with accrued sick or vacation days.

Read also:

How Donald Trump could change what it's like to be a parent in America

This new paid leave policy could be the smartest perk for families yet 

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