The Parental Leave Trap: Employee handbook edition
- Claire Baker
- Jun 6
- 8 min read
Regulations in seventeen states. Two kinds of short-term disability. Half a dozen weird payroll edge cases.
Make them work together. Then explain them to someone who hasn’t slept in three days. Go!
No mistakes. This will be on the test.
That's what designing a parental leave policy feels like. Layer on top of that,
state paid leave programs and insurance policies (that are both out of your control),
big-mouth managers (who may also be out of your control),
and every single payroll and benefit weirdness you've ever seen.
It's enough to make a grown HR professional cry like a baby.
Most handbook policies are written for rare edge cases. They make it easy to boil down to straightforward if/then statements or boilerplate language.
But parental leave is different. It combines the most complicated parts of HR into one policy:
Protected classes
Disability
Paid time off and sick time
Obscure payroll esoterica
Employees who are "active" but not "working," and sometimes don't come back when you expect
Insurance: policy details, deductions, and a qualifying event
Onboarding and offboarding, maybe more than once per person
A bajillionty federal, state, and local laws, many of which conflict with each other
A strong parental leave policy isn't just about the number of weeks. It's about understanding how company pay, state benefits and insurance interact, so your team isn't left stitching it together when they're sleep deprived and going through one of the biggest transitions of their lives.
Even if you go with the, F*ck it, we'll just pay full salary approach (and many do), there will still be edge cases to work out. Babies are unpredictable. You never know all the ways they can affect a parent's availability to work.
When your policy doesn't anticipate everything, your team winds up suffering the consequences during one of the most stressful and financially trying periods of their lives.
You're not God. So how are you supposed to build a bulletproof policy that prepares you for anything?
Fear not! Below, we'll walk you through the most important top-level things you need to consider when creating your parental leave policy. If you want to go into more detail, check out the Practical Guide that will walk you through brainstorming many of the edge cases and language to include in your policy.
"We cover 12 weeks" and other half-truths
Don’t confuse permission with pay
First off, make sure that your policy is clear about the difference between pay and job protections.
Some states offer paid parental leave. Some don’t.
And who is eligible, when, and for how much money varies across states.
Just because the state is paying you, doesn't mean your job is protected.
Just because your job is protected doesn't mean that anyone has to pay you.
And the company may or may not pay you when you're not working, regardless whether the state is paying or if your job is protected.
People (including those who work in HR) may assume that just because their leave falls under FMLA or state protections, that also means they'll be paid during that time. Which may not be the case.
Don't let your team make this mistake. Be clear in your written policy.
Your company may pay someone's full salary, only a portion of it, or not at all. Spell out what the company pays when the state is and isn't paying.
You don't have to correct for every state variation and explain what will happen in every contingency. You just need to make it clear if company pay changes when state payments are available.
It's complicated. So make sure that your policy is also clear about when leave starts and stops, when it's paid, and if state payments affect how much the company pays.
How does short-term disability (STD) work with parental leave?
Short-term disability insurance (if you have it) acts a lot like state paid leave—in that it's mostly out of your control and only covers a portion of income. What's nice about disability is that the math is easier. It usually covers a fixed percent of income, without baffling base periods and income caps.
Eligibility is where it gets tricky. "Disability" assumes that you've had some kind of medical event that prevents you from working. Only one parent (at most) has had one of those.
Unless your STD policy explicitly covers bonding leave (which most don't), more than half of parents won't be covered for parental leave. Most people (including HR pros) don't realize until it's too late.
In short, short-term disability plays favorites.
I don't know who needs to hear this right now, but you need to have a medical event (like having a baby) to get short-term disability.
Even if your STD policy covers "up to 6 months," the insurance company may have "defined benefits" for childbirth. The standard is 8 weeks for cesarian and 6 weeks... the "old fashioned way." The insurance company will demand evidence of additional medical issues before they extend payments beyond the defined benefits.
So, unless your company specifically asked for it, your disability insurance likely won't cover the standard 3 months of parental leave.
If your STD insurance doesn't cover all parents or your full leave period, say so in the policy.
Unless you're okay with excluding dads, adoptive parents, same-sex couples, stork deliveries, and all the other variations on how someone becomes a parent, don't rely on exclusively on disability insurance.
And for the love of god, don't promise anything if the insurance company (or the state) gets final say.
Offering top-ups is easy, paying them isn't
Topping up state benefits is a great way to save the company money and make sure everyone gets a consistent experience, no matter where they are or what their parenting role is.
But while top-ups look generous in policy, they get messy in practice. Especially when payments rely on external timelines you can’t control.
The People team has to absorb the administrative burden. It's not so bad if you think ahead and bake the logic into your policy. Have a plan for what you'll do when someone else is paying and when someone else isn't.
How will you verify the amount to top up?
What will you do if the claim is delayed and you don't know how much to top up?
What's the plan for when the state or disability benefit runs out (or if they weren't eligible in the first place)?
If it feels like you’re solving for every possible parenting scenario, it’s because you are. And some of them will feel like plot twists.
Could Your Parental Leave Policy Survive a Soap Opera Plot?
Disability and bonding are different. Or are they?
When you set your parental leave duration, consider whether bonding and disability will be counted separately.
To see how this works, consider this example:
Let's say your company pays for 12 weeks of parental leave and the birth parent—let's call them "Mom"— has a tough pregnancy. She's on bedrest for the last 3 weeks and isn't able to work. Then she has to stay in the hospital for 2 weeks after delivery.
Are those 5 weeks part of her company-paid parental leave or not? You decide.
Insurance and state requirements aside, you still have a choice about how disability interacts with your policy.
If your company needs Mom back at work on the 13th week, you may want to have disability and bonding leave come out of one "bucket." Mom still gets 7 weeks to bond (and can choose to take additional weeks unpaid after that), but the company has a little more predictability when planning her coverage.
But if you want Mom to have her full 12 weeks to bond with the kiddo, you may want to "stack" disability as a separate type of leave from parental leave.
When stacking, think about how the company will pay disability time. It doesn't have to be the same as bonding leave. And company-paid disability can be different from state or private insurance.
It's possible for someone to be:
on company-paid disability for 2 weeks
insurance-paid disability for 6 months, and
state disability for a year
Just decide where your company wants to draw the line on its payments.
Is bonding the same as caregiver leave?
Yes! No! You decide.
To see how this works, consider another example:
Let's say Mom has a devoted and supportive spouse named "Dad." Dad dutifully takes leave to care for Mom while she's on bedrest, then sleeps in the hospital with Mom and the kiddo until they're discharged.
Are those 5 weeks part of Dad's parental leave or not? He was caring for a family member. Two, even. But, it's different. Dad was fine physically, and he took time off to support baby and Mom.
Isn't that what non-birth parental leave is for? Or is it?
It's up to you.
Keep in mind that there are plenty of parenting structures that don't have one mom and one dad, and may not have a birth parent at all. Baby and/or parents may still have an event that requires treatment and prevents them from bonding.
You don't have to anticipate every soap opera plot that could possibly happen, but make sure your policy is ready for adoption, foster placement, surrogacy, and non-traditional family structures.
These aren't exceptions. They're everyday use cases.
Is this page already giving you ideas?
Our Practical Guide comes with a worksheet where you can take notes and track your decisions. Check it out here.
Payroll: Where Good Policies Go to Die
Show your work on the pay stub
Once you’ve decided what the company will pay and for how long, figure out how you’ll account for it in payroll.
First, you’ll need to designate the time they were paid, but not working. Here are some questions to think about:
How do you enter parental leave time in your payroll and/or HRIS? Like, what buttons do you click and when? What paper trail does it leave?
How will you handle top-ups or any kind of partial pay? What pay type? When? Is it calculated manually or does the payroll system calculate it for you?
How will you document the transitions between parental leave, PTO, disability, and other types of leave?
Do you know how to top up? Don't say "adjust their hours." You know better than that, right? Right?! (If you don't, that's okay. Email me and I'll let you in on the secret.)
Benefit deductions aren’t automatic
Many companies self-managing parental leave don't have a plan for benefit deductions, and may not even realize that they're paying the full premium for health insurance while the employee is on leave.
If regular paychecks stop, so do the benefit deductions. Which means that the company is paying the full insurance bill and isn't collecting their portion back from the employee.
Paying the full premium during leave is a great benefit, as long as that's what you were planning to do.
Frequently, no one even notices the discrepancy until someone stumbles on it while they're doing something else. Sometimes it's triggered by a payroll audit or a question from accounting months later. Sometimes the new parent never returns from leave.
Too often, HR comes after the new parent like a bill collector, making monster lump-sum deductions from their paychecks or demanding big payments back to the company.
However you choose to handle benefit deductions, make sure to define the terms and limitations in your written policy so you have clear guidance later.
Make the policy do the work
Taking questions one by one makes the process of creating a comprehensive parental leave policy much more manageable. Future-You and your team will be grateful that you thought through everything ahead of time to save them from the logistical and political headaches that come from making complex decisions under pressure.
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