Pay and Benefits

On 17 January Deputy Prime Minister Nick Clegg announced that the Coalition will press ahead with Labour’s plans to extend paternity leave. Some had been concerned that the Government might bow to pressure and water down the legislation which comes into force in April 2011. However, Clegg declared that the changes are just the beginning of a shift in the UK’s approach to work and parenting.

 

Clegg complained that current attitudes towards childrearing belonged in the Edwardian era and had no place in the 21st century. He said he wanted to go even further than Labour had planned in giving fathers and mothers greater flexibility to share parental leave after the birth of a child.

 

The announcement drew a mixed response. While equal rights campaigners and parenting groups welcomed it, many business groups were less enthusiastic. British Chambers of Commerce Director-General, David Frost, claimed that small firms in particular would find it “too difficult” to implement, while Alistair Tebbit of the Institute of Directors said the proposed system was “virtually unmanageable”.

 

The Government plans to consult fully on these longer-term proposals and will implement them before 2015, but in the meantime the existing legislative change which comes into force in April this year is already significant. Every payroll and benefits professional ought to be aware of this change to the law, of how it could affect their businesses, and of what they need to do now to prepare.

 

 

Ordinary Paternity Leave is one week or two consecutive weeks’ leave for eligible employees on the birth of a child or placement for adoption. This has been available to new parents since April 2003. For parents of a baby due on or after 3 April 2011, the right to Additional Paternity Leave (APL) comes into force. 

 

Amanda Jones, Partner and Head of the Employment, Pensions and Benefits Team at law firm Maclay Murray & Spens LLP, explains: “The statutory minimum entitlement for leave and pay will be to one period of APL, lasting between two and 26 weeks. The period of APL must be taken within a window that starts 20 weeks after the child’s date of birth or placement for adoption and ends 12 months after.”

 

For the father to be eligible for APL, the child’s mother must have been entitled to maternity leave, Statutory Maternity Pay or maternity allowance and have returned to work with at least two weeks of their pay period remaining. 

 

She adds: “The total number of weeks of Additional Statutory Paternity Pay (ASPP) that the employee will receive depends on the mother or partner’s unused weeks.”

 

The rate of pay is £124.88 a week or 90 per cent of normal weekly earnings if this is less. This increases to £128.73 a week on 11 April 2011. Employers can recover 92 per cent of payments made from HMRC; small businesses can recover 103 per cent. Employers must keep records for three years after the end of the tax year in which the employee’s ASPP started and these records must show evidence of entitlement to ASPP provided by the employee.

 

 

For employers the most significant effect of this law is likely to be the cost of employing someone to replace the person on paternity leave. However, it is easy to overstate the extent of this. First, for every father taking leave, a mother will have returned to work. Second, it remains to be seen how many men will actually take up their new rights. There is widespread disagreement about this.

 

On the one hand, when it first passed this legislation, the previous Government estimated that only between four and eight per cent of eligible employees will actually apply for APL. On the other hand, a November 2010 survey from UK executive coaching company, Talking Talent, indicated that 46 per cent of fathers would take advantage of it. 

 

Judith Germain, Director at HR consultancy Dynamic Transitions, believes that the level of take-up depends on the type of company in question. She explains: “Knowledge workers will tend to worry about the impact on their long-term careers and so will be unlikely to take APL. However, companies that have a high proportion of low skills or semi-skilled workers may find that there is a disproportionately high take-up of the APL entitlement.”

 

Regardless of take-up, there will be a significant administrative cost to business. Nich Crowson, Reward Specialist at HR consultancy, Independent, says: “Not surprisingly, the new legislation will lead to substantial additional administration and managerial time to ensure that the correct procedures are in place. According to the Chambers of Commerce, impending changes will cost industry £9.1 million a year. This burden will fall more heavily on smaller businesses which will have to undertake the same measures for far fewer cases.”

 

 

Payroll and benefits professionals have an important role to play in preparing their businesses for this change. Lauren McLardie, Employment Lawyer at Dawsons, offers detailed advice on how to achieve this. 

 

“The first step is to be clear about whether an employee is eligible for APL and ASPP. There are three criteria to meet. The employee must be the child’s biological father or the spouse or partner of the child’s mother, or in the case of an adoption he must be the spouse or partner of the person who has elected to take adoption leave. He must have the main responsibility for bringing up the child. He must have been continuously employed for at least 26 weeks ending with the week immediately before the 14th week before the child’s expected week of birth, and remain in continuous employment with that employer until the week before the first week of APL.”

 

Lauren says the second step is to prepare the right documentation and ensure that they are correctly completed. There are three key forms. The employee must give eight weeks’ written notice of their intention to commence APL. That notice must state the week in which the child’s birth is expected, the expected date of the child’s birth, and the dates on which he wants the APL to start and end. 

 

The employee must also sign a declaration stating that the purpose of the APL will be to care for the child, that they are the child’s father or the spouse or partner of the child’s mother and that they have main responsibility for caring for the child. The mother must provide a declaration stating her name, address and NI number, the date on which she intends to return to work and the employee’s status in relation to her and the child.

 

Finally, the employer must fulfil its obligations. Broadly speaking there are four obligations to consider.

 

Lauren says: “Within 28 days of receiving the employee’s leave notice you must confirm the relevant dates to the employee in writing. During APL you must continue to provide any benefits to which the employee is contractually entitled, except those which relate to remuneration. You must allow the employee to work for up to 10 Keeping in Touch days during their APL. 

 

You must allow the employee to return from APL to the job in which they were employed before their leave, as long as their period of APL lasted no more than 26 weeks.”

 

Above and beyond these important administrative tasks, payroll and benefits professionals need to be aware of the risk of claims for gender discrimination, and protect their businesses accordingly. 

 

Kate Russell, Director of Russell HR Consulting, says there are concerns that a decision made by the European Court of Justice on the Spanish case of Roca Alvarez v Sesa Start Espana ETT may cause problems for UK employers. The court found that the failure to allow all fathers the right to take time off to feed a baby was sex discrimination.

 

“There are no parallel provisions in UK law, but the Alvarez decision may have an impact upon the APL provisions. If Additional Maternity Leave (AML) becomes transferable to the father in the form of APL, Alvarez suggests that it will no longer be possible to justify different treatment of men and women on the grounds that AML is for the protection of new mothers,” she explains. “This may open the way for fathers on APL to argue for the same benefits from their employer as would be received by mothers on AML.”

 

 

Businesses dislike administrative burdens but they dislike uncertainty just as much, and many believe that the Government’s plans – however well intentioned – to consult on a more flexible system of parental leave above and beyond the legislation in April 2011, is damaging. 

 

Anna Williams, an Employment Lawyer at DLA Piper, comments: “Employers might have to implement two new regimes, one after the other, in a relatively short space of time. This could lead to uncertainty for UK businesses at a time when few firms can afford it.” 

 

While, it would be easy to view this new law as an administrative burden and a tedious compliance issue, more enlightened businesses will instead see it as an opportunity to help their staff achieve a better work–life balance with all the motivation, productivity and retention benefits that that brings. The simple, unavoidable fact is that society has changed and business needs to catch up.

 

As Caroline Gatrell, Senior Lecturer in Management at Lancaster University Management School, says: “Even in 2011 too many employers and managers tend to think of fathers as work-orientated, and to imagine that all mothers – even if they are in paid work – are child and home-oriented. This is a culturally ingrained but outdated and inaccurate assessment of the situation in which there are many different ways of doing family.”

 

As a result, employers who recognise that modern fathers want to be part of their children’s everyday lives, and who put in place effective policies to help them achieve this, will increasingly attract and retain the most talented, committed and productive people. The changes due in April will be an important first step in that direction.

 

Alex Blyth is a Freelance Journalist.