Microsoft Will Require US Suppliers to Provide Parental Leave

Microsoft Will Require US Suppliers to Provide Parental Leave

Over the coming year, Microsoft will implement a policy requiring its suppliers in the US to provide their employees a minimum of 12 weeks paid parental leave, paid at up to $1,000 per week, Dev Stahlkopf, Corporate Vice President and General Counsel at Microsoft, announced in a blog post on Thursday:

This change applies to all parents employed by our suppliers who take time off for the birth or adoption of a child. The new policy applies to suppliers with more than 50 employees and covers supplier employees who perform substantial work for Microsoft. This minimum threshold applies to all of our suppliers across the U.S. and is not intended to supplant a state law that is more generous. Many of our suppliers already offer strong benefits packages to their employees, and suppliers are of course welcome to offer more expansive leave benefits to their employees.

Our new supplier parental leave requirement is informed by important work on paid parental leave done in states, including Washington. In 2017, Washington state passed family leave legislation, including paid parental leave. This new law will take effect in 2020. As we looked at this legislation, however, we realized that while it will benefit the employees of our suppliers in Washington state, it will leave thousands of valued contributors outside of Washington behind. So, we made a decision to apply Washington’s parental leave requirement more broadly, and not to wait until 2020 to begin implementation.

Like other major US tech companies, Microsoft relies on an undisclosed number of workers employed by third-party contractors; this so-called “shadow workforce” of contract laborers, who typically do not enjoy the same generous benefit packages as those directly employed by these companies, has been the subject of growing scrutiny and recent labor disputes, as GeekWire’s Nat Levy points out. Microsoft has faced controversy over its contingent workforce in the past, most notably in a high-profile lawsuit by “permatemps” in the 1990s. The company began putting standards on labor conditions at its US suppliers in 2015, when it began requiring that those with 50 or more employees grant a minimum of 15 days of annual paid time off to eligible employees.

Microsoft’s latest move intersection of several broad trends shaping the benefits space in the US today.

First, as Stahlkopf acknowledged, employers in Microsoft’s home state of Washington will soon be required by law to provide paid family leave, funded by a system into which both employers and employees will pay. The Redmond-based software giant is pushing its suppliers in Washington to get ahead of this mandate; for those in other states (which account for half of the roughly 1,000 firms with which the company contracts), some will be facing similar requirements in the coming years.

Microsoft may be betting that other states in which it contracts suppliers will emulate Washington’s legislation eventually. In any case, the company is applying the common strategy of complying with a particularly strict state law and applying that policy nationwide; this is one way state-specific employment laws are having a ripple effect and big companies are shaping social policy at the national level.

Additionally, Microsoft is not the only large US company putting conditions on its suppliers’ HR policies. Through these requirements, large organizations are using their purchasing power as B2B clients to drive change at other companies. In 2015, Facebook began requiring that its suppliers provide a $15 minimum wage, at least 15 paid days off for holidays, sick time and vacation, and other benefits to their employees.

Supplier standards are also an increasingly common practice in diversity and inclusion: In the past few years, advertising agencies have faced increasing pressure from their biggest clients to diversify their creative teams, while the legal departments of tech companies like PayPal and Facebook have begun taking diversity into account in choosing which outside law firms to do business with. Organizations that track diversity and inclusion efforts are also taking these supplier initiatives into account; the Human Rights Campaign, for example, looks for LGBT-focused supplier diversity programs as part of the rating criteria for its Corporate Equality Index.

(Gartner Diversity & Inclusion Leadership Council clients can read our case studies on how four organizations successfully implemented supplier diversity programs.)

Microsoft’s decision to push for parental leave benefits at its suppliers also reflects the increasing awareness of “benefits inequality”—disparities in benefits between salaried and hourly employees, between employees and independent contractors, or among parents of different genders and sexual orientations. These inequalities are getting more attention from investors, the media, and the public, prompting a growing number of companies to embrace benefits equality as part of their HR-as-PR strategies, wagering that the boost to their reputations from being more generous with benefits will more than pay for the cost of that generosity.

In the tech sector, the employee/contractor divide has come into particular focus in this regard: SurveyMonkey made a splash earlier this year when it announced that its contractors would now receive the same benefits as its regular, full-time employees (who were instrumental in demanding that change). SurveyMonkey, which just filed for an initial public offering on Wednesday, and other small tech startups that are embracing contractor benefits see these choices as a statement of their values and a challenge to larger companies to move in the same direction.

The parental leave package Microsoft is asking its suppliers to offer is not quite as generous as what it offers to its own employees, Danielle Paquette observes at the Washington Post: Microsoft employees are entitled to 12 weeks of paid family leave at full pay, while birth mothers receive an additional eight weeks. Still, the requirement goes beyond what most US employees receive—to the point that some economists worry that not all of Microsoft’s suppliers will be able to comply:

“Some medium and small companies cannot afford to fund such long leaves in combination with having to pay other employees to cover the work of the absent employee,” said Aparna Mathur, an economist at the American Enterprise Institute, a right-leaning think tank in Washington. “That is one reason they are not offering these policies, even though they recognize the benefits that such a policy can offer their workers.” …

“We want to make sure that paid leave is provided in a way that imposes minimum costs on employers, otherwise we could see employees, especially women, face discrimination in hiring and salaries,” she said.