Shared parental leave and pay - Norton Rose Fulbright · shared parental pay and maternity pay. A ... currently take advantage of paternity leave and parental ... equally to parents

Shared parental leave and pay How will new legislation impact UK businesses?

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Contents

03 Executive summary

04 Keyfindings

06 Introduction

07 Current working arrangements for parents

09 We’ve got to put a lot of money into changing behaviour

10 Shared parental pay?

12 Fail to prepare, prepare to fail…

14 The good, the bad and the ugly

15 A storm in a teacup, or a brave new world?

16 Conclusion

17 Methodology

18 Global resources

Norton Rose Fulbright – April 2014 03

Executive summary

Executive summary

Less than a quarter of employers have taken action to prepare for new parental leave and pay arrangements, which apply to UK parents with babies due to be born from 5 April 2015, according to a survey by Norton Rose Fulbright.Under the new proposals, women will be able to commit to end their maternity leave at a future date, and share the balance of maternity leave and pay not taken with their partners, provided they meet certain conditions. This new regime is intended to introduce greater flexibility and gender equity to parental leave arrangements.

Responses from over 200 human resources professionals and employment lawyers across a range of sectors revealed that it may be some time before the proposals lead to any practical change in the way that childcare responsibilities are divided in the UK. Key stumbling blocks are low levels of pay during leave, and entrenched cultural resistance to men taking an active role in childcare.

Our survey covered a range of topics, from the composition of each organisation’s workforce, what family leave entitlements they currently have in place, how they plan to address the introduction of the new scheme, to what they view as the main impact and concerns arising from the forthcoming legislation.

04 Norton Rose Fulbright – April 2014

Shared parental leave and pay

67% statedthatnoneoftheiremployeeshavetakenadditionalpaternityleave,todate.

46% saidthattheywillonlycomplywiththeirstatutoryobligationsinrespectofbothsharedparentalpayandmaternitypay.Atotalof30percentstatedthattheywillnotofferenhancedsharedparentalpay,butwillcontinuetopayenhancedmaternitypay.

76% havetakennopracticalstepstoprepareforthechanges,butrecognisethattheywillneedto.

2% indicatedthattheywillreducethelevelofenhancedmaternitypay,orremoveitaltogether,asaresultofthechanges.

89% believethattake-upofsharedparentalleavewillbelow.

Keyfindings


Key findings

67% areconcernedaboutthe potentialcomplexitiesandincreasedadministrative burdenthatthenewsharedparentalleavesystemwillcreate.

48% areconcernedabouttheriskoffraudacrosstwoemployers.

54% anticipatethattheirorganisationswillneedtotalktotheotherparent’semployertodiscussleaveentitlements.

39% feelthatthechangeswillhaveanegativeimpactontheirbusinesses,withonly10.4percentenvisaginganypositiveimpact.

26% expectthebiggestpracticalimpactofthechangeswillbetheneedtoincreasesupportdevotedtohumanresources,whilstafurther26.5percentfeelthatthechangeswillmakeitmoredifficulttomanagetheirbusinesses.



Introduction

The UK’s deputy prime minister Nick Clegg has described the rigidity of the family leave entitlements in the UK as ‘Edwardian’. Currently, eligible mothers can take up to 52 weeks’ statutory maternity leave in total, 39 of which are paid, while fathers are permitted up to two weeks’ paid ordinary paternity leave. In addition, eligible fathers may take up to 26 weeks of additional paternity leave, provided that it begins no earlier than 20 weeks after the child’s birth, and after the mother has returned to work.

This creates a situation where mothers take a long period of initial maternity leave and leave is taken in long blocks, with limited flexibility for parents to choose how to share leave entitlements. To inject flexibility and greater choice into childcare choices, the government plans to introduce a new shared parental leave and pay system for babies due to be born on, or after, 5 April 2015.

Under the new proposals, women will be able to commit to end their maternity leave at a future date, and share the balance of maternity leave and pay not taken with their partners, provided that they meet certain conditions. This is designed to remove barriers to fathers engaging in caring for their child very early on in life.

The government aims to shift the entrenched view of the mother as the primary carer, eradicate gender bias, reduce the pay gap between men and women, and achieve ‘smart economics’ (a World Bank term for equal participation of men and women in the workplace). The government regards these outcomes as beneficial to both families and business and, indeed, to wider society.

Given the impending changes, we carried out a survey to gauge how employers are responding: what they are doing to address the introduction of the new system; how they feel the changes will impact their businesses; and what concerns they have about the proposals.

The response to the survey was impressive; more than 220 separate employers from a range of industries. Topics covered in the survey range from the composition of each organisation’s workforce, family leave entitlements already in place, how they plan to accommodate the new arrangements, and concerns about them. This report outlines the key messages drawn from the results of our survey.

Thank you to everyone who took the time to complete our survey. This report will give you an insight into how other businesses are approaching shared parental leave and assist you in helping your organisation prepare for the changes.

PaulGriffinHeadofemploymentandlabour,LondonNorton Rose Fulbright LLPTel +44 20 7444 [email protected]

CatrinaSmithPartner,LondonNorton Rose Fulbright LLPTel +44 20 7444 [email protected]

LaurenPullen-StanleySeniorassociate,LondonNorton Rose Fulbright LLPTel +44 20 7444 [email protected]


Current working arrangements for parents

Current working arrangements for parents

Ordinary maternity leave continues for a period of up to 26 weeks, and a further 26 weeks may be taken as additional maternity leave. Statutory maternity pay is paid for six weeks at 90 per cent of normal weekly earnings, and 33 weeks at the lesser of the statutory flat rate (currently £136.78 per week, increasing to £138.18 from 6 April 2014), or the rate payable during the first six weeks.

Interestingly, quite a high proportion of respondents (48 per cent) confirmed that they currently pay enhanced ordinary maternity pay, over and above statutory maternity pay entitlements during ordinary maternity leave. Only a small percentage of employers surveyed, (18 per cent), confirmed that they offer any form of enhanced pay during the additional maternity leave period.

Doesyourorganisationcurrentlypayenhancedordinarymaternitypay,overandabovestatutorymaternitypayentitlementsduringordinarymaternityleave?

Doesyourorganisationcurrentlypayenhancedadditionalmaternitypay,overandabovestatutorymaternitypayentitlementsduringadditionalmaternityleave?

In contrast with the position on maternity pay, a lower percentage of employers, (only 38 per cent), offered enhanced paternity pay during the initial one to two week period of ordinary paternity leave. The majority (92 per cent) offer no enhanced pay during additional paternity leave. Clearly, this may impact the involvement of fathers in raising their children in today’s world.

48+52+OEnhancedordinarypay

18+82+OEnhancedadditionalpay

YES

18%

82%NO

YES

48%

52%NO

Yes, we do

No, we only pay statutory maternity pay during ordinary maternity leave

Yes, we do

No, we only pay statutory maternity pay during additional maternity leave



Despite the limited duration of ordinary statutory paternity leave (up to two consecutive weeks) compared with maternity leave (up to 52 weeks), a quarter (26 per cent) of respondents confirmed that the vast majority of eligible employees do not take ordinary paternity leave. This may reflect the fact that statutory paternity pay is only £136.78 per week (increasing to £138.18 on 6 April 2014) (or 90 per cent of salary if lower), and that relatively few employers offer enhanced paternity pay.

Additional paternity leave (currently up to 26 weeks) is even more limited; it must be used within a period of time starting 20 weeks after, and ending 12 months after, the baby’s date of birth, and the individual’s spouse, civil partner or partner must have returned to work from her own statutory maternity leave.

A total of 67 per cent of employers confirmed that no employees had taken additional paternity leave. This is consistent with figures issued by the Department for Business Innovation & Skills, which estimates that only 2,150 people claimed additional statutory paternity pay in 2011/2012 (a drop in the ocean taking into account Office for National Statistics figures, which indicate that there were 723,913 live births in England and Wales in 2011, increasing to 729,674 in 2012).

It is clear (and perhaps unsurprising considering that only 8 per cent of employers surveyed offered enhanced additional paternity pay) that take-up of additional paternity leave is very low, and suggests that, currently, many parents do not share childcare responsibilities equally.

Doesyourorganisationcurrentlyofferenhancedordinarypaternitypayforordinarypaternityleave,overandabovestatutorypaternitypayentitlements?

Doesyourorganisationcurrentlyofferenhancedadditionalpaternitypayfortheadditionalpaternityleaveperiod,overandabovetheadditionalpaternitypayentitlements?

39+61+OEnhancedordinarypay

8+92+OEnhancedadditionalpay

YES

8%

92%NO

YES

38%

62%NO

Yes, we do

No, we only pay statutory paternity pay during ordinary paternity leave

Yes, we do

No, we only pay statutory paternity pay during additional paternity leave

Commentary“Fathers can already take some of the mother’s maternity leave, yet in my experience I have yet to receive a request for this.”

“Male employees do not currently take advantage of paternity leave and parental leave entitlements.”


Current working arrangements for parents / We’ve got to put a lot of money into changing behaviour

Domostofyouremployeeswhoareeligibletotakeordinarypaternityleave,takeit?

Haveanyofyouremployeeswithbabieswhichweredueonorafter3April2011takenadditionalpaternityleave?

26%

67%

17%

22%

44%

7%

13%

4%

We’ve got to put a lot of money into changing behaviour (Bill Gates)

Employers seem particularly interested in the issue of enhanced shared parental pay. The government’s position is very clear: employers who offer enhanced maternity and paternity schemes which are more generous than statutory entitlements should be able to continue to offer this; the new system will not affect employers’ ability to offer enhanced maternity schemes.

Moreover, the government has stated that maternity leave is a protected period, and companies are able to offer maternity

benefits to women only; companies are not legally obliged to create enhanced shared parental leave schemes. It is worth noting that many legal commentators do not support this position because of the risks it potentially carries for attracting discrimination claims, and claims for breach of the duty of mutual trust and confidence arising where enhanced maternity benefits are offered to mothers, but are not offered equally to parents taking shared parental leave. Many think that it is only a matter of time before such a claim is brought.

No, the vast majority do not take it

About 50% take it, the other 50% do not

Yes, the vast majority do take it

In our experience, all eligible employees take ordinary paternity leave 67+22+7+4No, none of our employees have taken additional paternity leaveYes, but a very small number only (fewer than 2% of the workforce)Yes, some have (between 3% and 19% of the workforce)Yes, many have (more than 20% of the workforce)

25+14+44+12



The risk of such a claim already exists for employers who offer enhanced maternity pay, but little (or no) enhanced paternity pay (a common position). However, of the 200+ employers surveyed, none have been involved in any employment claims in the last three years relating to less favourable treatment of a man as a result of enhanced benefits provided to mothers. This may be because the risk is currently minimal due to the relatively small number of employers which offer enhanced pay during the additional maternity leave period; this makes it difficult for a man on additional paternity leave to compare himself

with an appropriate female who receives more generous benefits for the same period.

Still, the risk of a claim remains and is, we think, increased under the new system; fathers can start shared parental leave much earlier than additional paternity leave under the current law and, accordingly, this makes it easier to identify an appropriate female employee who receives enhanced maternity pay during the initial stages of maternity leave (which, as noted previously, is quite common).

Shared parental pay Less than a quarter (around 23 per cent), of respondents said that they will offer enhanced shared parental leave pay at the same level as their enhanced maternity pay scheme (bearing in mind that less than half of employers surveyed offer enhanced maternity pay in the first place). A further 1 per cent said they will offer it at a lower rate than their enhanced maternity pay.

It is clear that some employers are choosing to go beyond what the government considers to be necessary. One reason for this could be organisational culture. By contrast, 30 per cent of employers stated that they will adopt the government’s line of reasoning – complying with their statutory obligations only in respect of shared parental leave pay, whilst continuing to offer enhanced maternity pay, with the remaining 46 per cent stating that they will only pay statutory entitlements for both shared parental leave pay and maternity pay. Overall, this means that the overwhelming majority (more than 75 per cent) of respondents are choosing to pay statutory shared parental pay only.

One concern raised by commentators is that employers who currently offer enhanced benefits may decide to cut enhanced maternity benefits back as a result of the litigation risk arising from offering enhanced maternity pay, but no enhanced shared parental pay. Just over 2 per cent of respondents stated that they intend to reduce or remove their current enhanced level of maternity pay. This is a small number, but multiply it nationwide, and the new legislation could be seen as being a law of unintended consequences. In view of the government’s clear view that there is no legal requirement for companies to create enhanced shared parental leave schemes (even if they offer enhanced maternity benefits), it may be that the levelling down of enhanced maternity benefits is a result of the increased cost of offering equivalent benefits (if an employer so chooses) to those who take shared parental leave, as opposed to the litigation risk specifically.


What are employers doing about shared parental pay?

Aside from the above legalities, whether the government’s laudable aim of a ‘fairer society’ comes to fruition will, we feel, very much depend on whether employers offer enhanced benefits to those on shared parental leave. As Bill Gates once said, “We’ve got to put a lot of money into changing behaviour”.

Willyourorganisationofferenhancedsharedparentalleavepayoverandabovestatutoryrequirements?

23%1%0%

30%

46%

Followingtheintroductionofthesharedparentalleavearrangements,willyourorganisationdoanyofthefollowinginrespectofmaternitypay?

43%2%

49%6%

Yes, at the same level as our enhanced maternity pay schemeYes, at a lower level than our enhanced maternity pay schemeYes, at a higher level than our enhanced maternity pay schemeNo, we will comply with our statutory payment obligations only in respect of shared parental level pay, even though we will continue to pay enhanced maternity payNo, we will only pay statutory entitlements for both shared parental leave pay and maternity pay 43+2+49+6Retain its current enhanced level of maternity pay

Reduce or remove altogether its current enhanced level of maternity payNeither of the above as we only offer maternity pay in line with statutory requirements

Other



Fail to prepare, prepare to fail…So how are employers preparing for the changes next year?

The good news is that most respondents (65 per cent) felt that the notice period provided for under the legislation (eight weeks to end maternity leave and eight weeks to take any period of shared parental leave) gives them sufficient time to organise their workforces and plan for absences. In addition, they welcomed the introduction of the procedural requirement on employees to provide a non-binding indication of their expected pattern of leave, and a cap of three notifications for leave, or changes to periods of leave, as a positive development.

The bad news is that 67 per cent of employers surveyed expressed concern over the potential complexity and increased

administrative burden that the new shared parental leave system creates. In addition, nearly half of all respondents were worried about the risk of fraud across the two employers involved in a shared parenting arrangement. Despite the fact that the government has stated clearly that the form for requesting shared parental leave will not contain information about each parent’s employer, and that employers will not be required to contact the employer of the other parent to make checks, more than half of all respondents stated that they anticipate that their organisation will need to talk to the other parent’s employer in order to discuss leave entitlements.

Dothenoticeperiodsprovidedforunderthelegislation(8weekstoendmaternityleaveand8weekstotakeanyperiodofleave)giveyourorganisationsufficienttimetoenableittoorganiseitsworkforceandplanforabsences?

Isyourorganisationconcernedaboutthepotentialcomplexityandincreasedadministrativeburdenthatthenewsharedparentalleavesystemwillcreate?

65+35+O 67+33+OYES

67%

33%NO

YES

65%

35%NO

Yes, they do

No, they don’t

Yes, we are

No, we’re not


Fail to prepare, prepare to fail…

Notwithstanding the concerns expressed by respondents about the increased burden the new scheme may place on employers, over three quarters (76 per cent) stated that they had taken no practical steps to prepare for the introduction of the new shared parental leave system. Indeed, only 7 per cent of employers have taken legal advice on how best to proceed. This is surprising. Employers could find themselves ill-equipped to deal with any employees who may request shared parental leave next year. This is particularly

so as the implementing regulations (which have now been published in draft form) are due to come into force on 1 October 2014 and have effect in relation to children whose expected week of childbirth is on or after 5 April 2015, so employers may well receive requests in the latter part of this year, 2014. This may reflect the fact that the vast majority of employers (89 per cent), feel that take-up of shared parental leave will be low and, therefore, this is not an issue which will affect their business.

Whatpracticalstepshasyourorganisationtakentopreparefortheintroductionofthenewsharedparentalleavesystem?(Respondents were to choose all that apply)*

7%

9%10%76%

3%

Intermsoftheleveloftake-upofsharedparentalleavein2015doyouthinkthattherewillbe:

11+89+OAhighlevel oftake-up

11%

89%Alowlevel oftake-up

*Since some respondents chose more than one answer to this question, the total percentage of responses received equals 105%.

A high level of take-up

A low level of take-up

7+9+10+76+3Commentary“In theory the shared parental leave is a nice idea – however to efficiently run a business in this cost- and resource-restricted environment, this additional bureaucratic burden does not help – the flexibility of the leave taker is too big and makes resource planning difficult.”

“I suppose that in reality you go from having a workforce where 50 per cent could take maternity leave to 100 per cent … possibly [taking] maternity leave and it always has a cost to the business hence it could work out [more] costly.”

We’ve taken legal advice on how best to proceed

We have decided how we will proceed and have amended our written policies accordinglyWe have or will shortly send communications to our employees in respect of the changes We haven’t taken any practical steps yet, but recognise that we will need to

Other



The good, the bad and the ugly

Obviously the new shared parental leave scheme represents change, something with which both employees and employers will need to become familiar. It is clear from our survey that few employers (11 per cent) feel that the changes will have a positive impact on their business. Retaining talent and experience, and achieving a balanced participation of men and women in the workforce were identified as being positive aspects of the new arrangements with 8 per cent and 10 per cent of employers surveyed, respectively, identifying these as the biggest positive practical implications of the changes.

Although approximately half of employers surveyed felt the changes will have neither a positive nor a negative impact on their business, nearly 40 per cent expressed concern that the changes will have a

negative impact on their business: half anticipate a need to increase human resources personnel to deal with requests and increased difficulty in managing their businesses, including finding cover for absences (with particular concerns raised by industries with highly specialised but small workforces). Arranging cover for multiple short periods of leave (as distinct from one extended period of leave) is also a key concern identified in the Department for Business Innovation and Skills March 2014 report on employer perception of employment regulation. The other key concerns are that male employees may take more leave than previously (particularly in sectors which employ predominantly male skilled staff) and that the proposals may be seen as unfair by other members of staff, in particular non-parents).

Asanemployer,whatimpactwillthenewsharedparentalleavearrangementshaveonyourbusiness?

Whatwillbethebiggestpracticalimpactonyourbusinessofthenewsharedparentalleavearrangements?

1%

26%

10%

8%

50%

10%

29%

27%

10%

29%

Commentary“We are a highly specialised, but small, manufacturing business and to lose a highly trained staff member for six months could be disastrous. I cannot understand how shared parental leave could in any way benefit this business.”

It will have a very positive impact

It will have a slight positive impact

It will have neither a positive or a negative impact

It will have a slight negative impact

It will have a very negative impact

It will increase the resources we need to devote to HR functions and create logistical difficulties and increased administrative burden and costIt will make it easier for us to retain talented and experienced members of staffIt will help our organisation achieve a balanced participation of men and women in our workplaceIt will make it more difficult for us to manage our businessIt is unlikely to have any real impact on our business

1+10+50+30+1026+8+10+27+29


A storm in a tea cup or a brave new world?

A storm in a teacup, or a brave new world?

Our survey reinforces the government’s own estimate that only 2 per cent to 8 per cent of people are expected to take up shared leave. Just short of 90 per cent of respondents felt that there would be a low level of take-up of shared parental leave. Whether the government will achieve its stated aims of removing the entrenched view of the mother

as primary carer, eradicating gender bias, reducing the pay gap between men and women, and achieving ‘smart economics’ will depend on whether fathers actually use the shared parental leave system. So why is it that many believe the take-up will be so low?

Four key reasons for this were identified by the respondents to our survey:

1 A shift in societal attitudes will be required before change materialises: many respondents felt that female employees would prefer to remain as the primary carer and would be reluctant to share the

period of leave with their partners. Likewise, fathers are reluctant to assume the role as primary carer.

2 Men are regarded as, more commonly, the higher earner: in practice, most decisions about childcare will be driven by economic considerations, e.g. which approach will leave parents better

off financially. If the majority of employers do not offer enhanced shared parental pay, and men continue to dominate the top wage brackets, then women are likely to continue to be the primary care givers.

This effect may be compounded by the Office of National Statistics report on patterns of pay, published on 27 February 2014, which reports that the gender pay gap for full-time employees has worsened. That said, the report provides a glimmer of hope in that the median gender pay gap by age group, based on full time hourly earnings, is noted to be relatively small in age groups 18-21, 22-29 and 30-39. After those ages, however, it is relatively large.

3 Low take-up to date of additional paternity leave: an additional period of paternity leave of up to 26 weeks has been available since 2011.

4 Perhaps most fundamentally, the low level of pay during shared parental leave: the absence of well-paid leave for parents, as indicated in our report, will have a negative impact on the take-up of

shared parental leave. This is why the general secretary of the Trades Unions Congress famously referred to the UK as ‘the Scrooge of Europe’.

In respect of point 4 above, by comparison, since Norway introduced and then extended a fathers’ quota in the 1990s, the proportion of men taking some leave increased twenty-fold to 89 per cent. The likely key to its success has been that pay has been set at between 80 per cent and 100 per cent of fathers’ earnings (subject to a cap based on a multiple of the basic national insurance benefit payment).

The decision by the government to drop the proposals for ‘Daddy month’ (an additional period of 4 weeks’ paid paternity leave, reserved exclusively for the use of fathers), and the proposed pay levels being the same as the flat rate statutory maternity pay, could prove to be the proposals’ Achilles’ heel. It may, therefore, be quite some time before ‘Latte Pappa’ (men on leave) emerges in the UK.

Commentary“Social reasons about who should be the primary carer of children, combined with biological reasons (who can breastfeed), combined with organisational reasons connected to concern over career progression, men generally having higher income etc...”

“Men are usually the higher earner, so it doesn’t make sense, financially, for the mother to return to work and the father [to] take time off at a radically reduced rate of pay.”

“I expect it will be taken up in some instances when a women earns significantly more than their partner.”

“There has already been an entitlement for fathers to take some of the maternity leave entitlement. No one with this entitlement has expressed any interest.”

“Based on the company only paying the statutory minimum, I believe that most employees will choose not to take the shared parental leave.”

1+10+50+30+1026+8+10+27+29



Conclusion

The government’s aims in introducing the new system of shared parental leave and pay are laudable. Although most commentators and, indeed, respondents to our survey, believe that initial take-up of shared parental leave will be low, this may change over time.

What is clear from the results of our survey is that UK employers are concerned about the complexities of the new system, and the additional burdens that it may place on their businesses, particularly in these economic times.

Notwithstanding the above concerns, it seems that many UK employers have yet to take steps to familiarise themselves with the new system, which could leave them unprepared for the change that will come. This is a concern. We would suggest that sooner, rather than later, companies are advised to set in motion a plan of action detailing how their organisation will respond to the impending changes. 0+7+1+1+7+2+17+3+0+11+14+4+2+4+1+2512+33+20+34ContactsTo discuss any of the issues found within our report and to assist you in preparing for the upcoming changes, please contact:

PaulGriffinHeadofemploymentandlabour,LondonNorton Rose Fulbright LLPTel +44 20 7444 [email protected]

CatrinaSmithPartner,LondonNorton Rose Fulbright LLPTel +44 20 7444 [email protected]

LaurenPullen-StanleySeniorassociate,LondonNorton Rose Fulbright LLPTel +44 20 7444 [email protected]


Methodology

Inwhichsectordoesyourorganisationoperate?

Companysize

0%

13%

7%

33%

1%

20%

1%

34%

7%2%

17%3%0%

12%14%

4%2%4%1%

25%

AgricultureBanking / financial servicesCommunicationsEnergy / utilitiesHealthcareHospitality / leisureManufacturingMediaMiningProfessional servicesPublic sectorReal estate / construction / infrastructureRetailScience and technologyTransportOther

MethodologyOur survey was sent to human resources professionals and employment lawyers in the UK in January 2014, with responses gathered until the end of February 2014. The 222 respondents worked in a range of organisations across a wide variety of sectors, including, among others, banking and financial services, manufacturing, professional services and the public sector. The survey was conducted online with respondents being free to remain anonymous if they so wished.

The respondents ranged in seniority from human resources managers and company secretaries to group human resource directors and were drawn from companies of various sizes. Of the responses, 34.2 per cent came from organisations employing over 500 employees. The composition of the respondents’ workforces between male and female employees was diverse: 31.4 per cent had a workforce made up of 51-75 per cent female employees, 10 per cent had a workforce which comprised 0-10 per cent female employees.

Fewer than 50 employees50 to 250 employees251 to 500 employeesOver 500 employees 0+7+1+1+7+2+17+3+0+11+14+4+2+4+1+2512+33+20+34



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Shared parental leave and pay - Norton Rose Fulbright · shared parental pay and maternity pay. A ... currently take advantage of paternity leave and parental ... equally to parents

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