Non-profits can attract talent with parental leave “top-ups”

This article was originally published in partnership with the Ontario Nonprofit Network (ONN)

Nov 12, 2021

As part of our commitment to diversity, equity and inclusion (DE&I) as it relates to nonprofit organizations, RSM will author a series of articles exploring key DE&I themes. One area involves women’s economic empowerment. In this inaugural post, Ontario Nonprofit Network (ONN) will introduce the topic of parental leave benefit top-ups. RSM recently worked with the ONN on an important initiative to look at the possibility and sustainability of a pooled maternity and parental top-up fund for nonprofit organizations. With competitive parental leave benefit top-ups, nonprofit employers can better support and retain key workers who choose to have families, as this benefit will supplement their income during their parental leave.

Nonprofits can attract talent with parental leave top-ups

For the nonprofit sector, attracting and retaining talent can be a major challenge. Rewarding and meaningful work in service of communities—whether in shelters, food banks, kids’ mini leagues or theatres—often comes with a “care penalty” on compensation and benefits, uncertainty of long-term contracts and lack of opportunities for advancement. In other words, the sector can lack decent work. Moreover, it is often competing with the for-profit and public sectors for talent.

This has become more of an issue during the COVID-19 pandemic, as women have been disproportionately impacted by caregiving needs that have pulled them out of the labour force, while many frontline workers are burnt out and exhausted. Given that the majority of the nonprofit workforce consists of women, nonprofits are looking for better ways to recruit and retain talent who can then deliver the best care to the communities for which they work.

The impact of COVID-19 lockdowns on women

While the pandemic continues, it is especially challenging for women and their families. They have felt the brunt of the impact as they work from home, care for children amid school and daycare shutdowns and still manage their households. The “shecession” —coined by Canadian economist Armine Yalnizyan— - poignantly refers to the way in which there has been a mass exodus of women from the labour market due to these influences. Many nonprofits are concerned about being able to offer services with full capacity as their female workers make difficult decisions between caring for children or elders, or continuing their outside jobs.      

Exploring an innovative idea to make top-ups a reality in the nonprofit sector

Recently, ONN and RSM Canada looked at the possibility and sustainability of a pooled top-up fund for maternity and parental leave benefits. A pooled fund would spread the cost of a top-up program across participating organizations, and smooth cash flow challenges related to unpredictable parental leaves. In this way, it would be affordable for employers, while boosting decent work for workers. RSM performed market research on whether employers would be interested in paying into a pooled fund, financial modeling with 10-year projection to see if the fund was affordable and sustainable, and business planning to better understand administration and governance options for the fund.

Our work determined that a pooled fund is both possible and sustainable. It is possible to pull resources together in a way that drives down the cost of top-up benefits for employers and provides good coverage for workers. The cost for employers can potentially be less than 1% of their monthly payroll budget, which in turn can provide workers up to 30% income replacement of their average earnings – and up to 85% for those who qualify for EI. The financial modelling also highlighted this can be done without a waiting period or maximum insurable earnings threshold. Designed in this way, the fund could build a surplus over the years and remain sustainable. Now, ONN will use this research and modelling to figure out how to make this pooled fund a reality for the sector. 

Top-ups as a critical tool for recruitment and retention in women-majority sectors, like the nonprofit sector

Maintaining income levels for new parents of all genders is good social policy and a decent work employer practice. We know that new parents who take leave to care for children, most of whom are usually women, experience a significant loss of income. Moreover, evidence highlights that top-up benefits help employers of all sizes to attract and retain top talent, lowering the high cost of employee turnover.

The top-up fund would allow for extended benefits for childcare and maternity needs for nonprofit employees. Initiatives such as this position nonprofit organizations as appealing prospective employers to top talent who may be looking to join the nonprofit sector.

Better benefits for employees can result in greater reach for nonprofits

Considering COVID 19, talent acquisition has been a primary concern for all organizations, not simply for nonprofit organizations. There is already a gap between benefits provided by large public companies and nonprofit sector organizations and this gap could widen significantly more soon given the increasing interest in Environmental, Social and Governance (ESG) reporting demanded by investors. As for-profit companies and organizations embrace ESG reporting, they will likely improve policy benefits that attract more women to improve on their diversity and inclusion ESG metrics.  As such, the nonprofit sector may face more of a burden as large public companies are more willing and able to invest in key and high-potential employees. However, talented individuals are looking for roles that speak to their desire to have an impact on a much broader scale – which is where nonprofit organizations may have the upper hand. Initiatives such as top-up funds can be the edge that nonprofit organizations need to secure top-talent and further serve their missions and communities.