Parental leave and its implications for the employment of persons with disabilities in mandatory employment systems

Purpose Under South Korea’s mandatory disability employment quota system, employees with disabilities who are on parental leave are excluded from a company’s quota. This study examines how firms responded to losses resulting from parental leave based on their level of mandatory employment compliance. Design/methodology/approach This study applied unconditional quantile regression (UQR) to estimate the impact of parental leave on employment outcomes for individuals with disabilities. Due to the noncompliance tax system design, the parental leave of individuals with disabilities affects companies differently depending on their compliance rate with mandatory employment. Findings We analyzed novel administrative data and found that most companies experienced a reduction in their compliance rate due to delays in hiring replacements for employees on parental leave. Small and medium-sized enterprises exhibiting higher compliance rates are more inclined to hire replacements to mitigate the financial repercussions of noncompliance tax. Originality/value This study is the first to analyze the impact of parental leave for employees with disabilities on the employment rate of people with disabilities in companies, using large-scale administrative data. Additionally, the study applies the RIF regression model to investigate how the incentive system related to mandatory employment of people with disabilities operates.