The risks and financial burden to employers of shared parental leave
After much media attention, the new system of shared parental leave (SPL) finally came in to force yesterday, to take effect from 5 April 2015.
So what is SPL?
- Subject to notification requirements, it is a statutory right allowing all qualifying parents to take up to 50 weeks’ leave and 37 weeks’ shared parental pay (ShPP)
- SPL can be shared between parents concurrently or consecutively in continuous or discrete one week blocks
- SPL is separate from, and in addition to, compulsory maternity leave and ordinary paternity leave
- Broadly speaking, parents will qualify if they are employed and their partner is either also employed or meets the ‘economic activity’ test.
The costs and risks to employers?
Simply having an SPL policy in place isn’t enough. Employers need to actively think about how SPL will dovetail with existing maternity and paternity polices.
Employers may also be concerned about the financial burden of offering an enhanced rate of ShPP to match an existing enhanced rate of maternity pay.
The concerned employer (let’s call them Concerned Limited) may, therefore, be considering any of the following three options:
1. Pay ShPP at the statutory rate only for all employees taking SPL
If more males than females take SPL for example (on the basis that a mother opts out of maternity leave to allow a partner to take time off), a disparity between ShPP and its enhanced maternity pay could potentially leave Concerned Limited exposed to claims from male employees complaining the policy puts them at a particular disadvantage over female colleagues. But can male employees taking SPL really compare themselves to females on maternity leave and, if so, would the difference in treatment be justified? This is an issue which is likely to be the subject of future litigation.
Secondly, its female employees may be unhappy too. A lower rate of ShPP compared to maternity pay may be seen by a mother as a penalty for taking SPL. Given that the SPL Regulations protect employees from being subjected to a detriment for taking SPL, this could present an issue.
2. Enhance ShPP for female employees only
Yes this may mitigate the detriment claim mentioned above but it would leave the door wide open for male employees to bring discrimination claims, so this is a non-starter.
3. Enhance ShPP for all employees
Certainly this option will be the least risky in terms of potential claims but what about the financial burden?
Although many employers will be understandably concerned about the potential financial burden of enhancing ShPP to match maternity pay policies, the effect may not be so great. A TUC (Trades Union Congress) analysis of official figures showed that in 2011 and 2012 just 0.6% of eligible partners exercised their right to additional paternity leave. The SPL Regulations may have arrived but the cultural barriers to partners taking extended leave are likely to persist for some time to come.
So what should employers do?
- Put an SPL policy in place now
- Review other leave policies to make sure they all work together (e.g. switching between types of leave, abolition of additional paternity leave etc.)
- Consider the financial impact of enhancing ShPP to match any enhanced maternity pay versus the risks of not doing so. Be ready to justify the difference
- Consider taking advice. SPL is a very complex system with a number of wider implications that employers do need to consider in advance of the right to SPL taking effect in April 2015.