Microsoft to require contractors to give paid family leave

Software firm wants vendors to offer employees benefits similar to Microsoft workers’

Microsoft Corp. will soon require its suppliers and contractors to provide at least 12 weeks of paid time off to new parents, the software giant said Thursday.

The policy applies to Microsoft vendors with more than 50 employees and covers workers given substantial assignments for Microsoft. For example, a staffing agency that provides information-technology professionals to Microsoft and other clients would only have to cover employees assigned to Microsoft. It will impact thousands of workers around the country, the company said.

The paid leave benefit requirement will be capped at $1,000 a week in compensation, and Microsoft suppliers have 12 months to implement the change.

Pressure is mounting for employers, states and the federal government to offer family-leave benefits. Microsoft’s new policy expands an initiative the company put into place in 2015, when it began to require that its vendors provide at least 15 days of paid sick or vacation time annually to workers assigned to Microsoft contracts.

The latest change answers some criticisms faced by large U.S. corporations as they outsource more functions to contracting firms, staffing agencies and other third parties. By outsourcing more work, firms frequently avoid paying the goldstandard wages and benefits they provide to their internal employees. Third-party companies compete on price for valuable contracts, which reduces their incentive to provide higher wages and more benefits to their own employees.

Dev Stahlkopf, Microsoft’s general counsel, said that when the company implemented the 2015 requirement for paid time off, she heard from suppliers that some had wanted to offer greater benefits to employees but were reluctant to do so because rivals with fewer benefits would sell their services at a lower price.

With the benefit mandate, Microsoft is taking a step toward bringing the benefits of people not directly employed by the company closer in line with those of its own people. Microsoft’s employees receive 12 weeks of fully paid leave for new parents, with an additional eight weeks for birth mothers.

Microsoft was the subject of the famous “permatemp” lawsuit, a long-running class action filed by workers who accused the company of using long-term temp workers to do the work of employees while denying them the benefits that employees received. The firm settled that suit in 2000 for $97 million.

Microsoft’s new policy also comes as more states and cities pass family-leave legislation that requires employers to provide a minimum number of paid days off to care for family members, including a new baby.

The company’s policy closely mirrors a law passed in 2017 by legislators in Washington state, where Microsoft is based. It guarantees most workers in the state get 12 weeks of paid time, also at a cap of $1,000 in compensation per week. That benefits, which will be in place by 2020, will be funded through a tax on workers in the state and a smaller tax on employers.

While that law “will benefit the employees of our suppliers in Washington state, it will leave thousands of valued contributors outside of Washington behind,” Ms. Stahlkopf said, adding that Microsoft’s new policy will affect thousands of workers outside of Washington.

“We understand this may increase our costs, and we think that’s well worth the price,” she said. Microsoft didn’t track its additional costs after the 2015 vendor-benefit requirement was put in place, she added.

While moves like Microsoft’s remain rare, it is not the only high-profile company to extend its influence to its nonemployee workforce. In 2015, shortly after Microsoft made its announcement mandating paid sick leave, Facebook created a minimum wage of $15 for the employees of its contractors and vendors and required those firms to provide at least 15 paid days off and a $4,000 new-child benefit for parents who didn’t already receive paid parental leave.

Some experts say measures like Microsoft’s send a valuable message about the importance of parental benefits, but add that a federal policy is necessary to improve a meaningful majority of parents’ ability to balance work and caregiving responsibilities.

“That’s the only way we’re going to see large margins of low- and middle-income Americans get access to paid leave,” said Adrienne Schweer, a fellow on the Paid Family Leave Task Force at the Bipartisan Policy Center, a Washington, D.C.based think tank.