The government has launched a widespread review of parental leave and pay in a bid to make the system fairer for those working and having children.
The review will look at the whole system – from maternity and paternity leave to shared parental leave, as well as the related pay – to see how it can work better for parents, employers and the economy.
Millions of families could benefit from the shake-up, the government said.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Campaigners have argued the current system is complicated and doesn’t always give families the support they need. The government has said it agrees with them.
For example, one in three dads don’t take paternity leave because they can’t afford to and take-up of shared parental leave remains very low, according to government data.
Labour wants fathers and partners to be able to be present to support the mother’s recovery, and “play an active role in caring for their child from day one”.
It pointed to the potential financial benefits – for women and the UK at large – citing research showing that better parental leave can help close the gender pay gap and boost the economy by billions of pounds.
The review will gather views from parents, employers and experts across the country and will end with a roadmap for possible reforms, as part of the government’s ‘Plan to Make Work Pay’.
Angela Rayner, deputy prime minister, said: “Those early years are the most special time for families, but too many struggle to balance their work and home lives. Supporting working parents isn’t just the right thing to do – it’s vital for our economy.
“Through our Plan to Make Work Pay, we’re already improving the parental leave system with new day one rights. This ambitious review will leave no stone unturned as we deliver for working families.”
What could the changes to parental leave mean for you?
The government’s starting point for its review into parental leave is that the current system doesn’t work and needs changing. So if you are thinking of starting a family soon, the present rules may no longer apply by then (although the review is planned to take 18 months so nothing is being altered immediately).
At the moment, the government said the problem is the system of existing parental leave and pay entitlements has grown incrementally over time, rather than with a joined up design.
This has created what the government has called a “complex landscape” of employment and social security legislation – with parental leave and pay entitlements that were never designed to operate as a single ‘system’.
“This review presents an opportunity to reset our approach and understanding of parental leave and pay and what we want the system to achieve,” the government said.
The government is only at the review stage so it doesn’t know what it will do yet to change the present set-up. But it has some objectives against which it will consider the current system and the case for change of any future reform.
These are:
Maternal health – give women sufficient time away from work with an appropriate level of pay to support them through pregnancy and post-partum.
Economic growth – enable more parents to stay in work and advance in their careers after starting a family, particularly women, and to narrow the gender pay gap, reduce the ‘motherhood penalty’, and harness benefits for employers
Babies and young children’s wellbeing – ensure sufficient resources and time away from work to support new and expectant parents’ wellbeing and that of their children
Childcare – support parents to make childcare choices, including enabling co-parenting, and provide flexibility to reflect the realities of modern work and childcare needs
The review will also look at how the parental leave system can work for different types of parents – such as birth, single, adopters, kinship – as well as different employment statuses, from employee to worker and self-employed.
This government’s announcement comes shortly after the recent report from the Women and Equalities Committee, which could give more clues to the outcome of the review.
The Committee concluded the current system for paternity leave is “completely out of step with how most couples want to share their parenting responsibilities” and “entrenches outdated gender stereotypes about caring”.
Paternity leave is only two weeks at a statutory rate that is lower than the national living wage. The government may look to increase this.
In the UK, the current right is for fathers and same-sex partners to take up to two weeks of statutory paternity leave. This must be taken within 52 weeks of a child’s birth and is paid at the rate of £187.18 a week or 90% of average weekly earnings (whichever is lower).
Nicola Wallbank, employment partner at law firm Freeths, said: “The current system certainly does lead to many new fathers and same-sex partners falling through the gaps in the system, with the self-employed, or those who have not yet been with their employer for long enough (i.e. less than 26 weeks before the “qualifying week”) being entitled to nothing in way of paternity leave or pay.”
Shared parental leave shake-up
The shared parental leave scheme that was brought in in 2014 was designed to give dads and other parents the chance to play a more prominent role in parenting in the first year.
This provides a means for parents to effectively surrender maternity leave and pay and switch into the shared parental leave regime so that up to 50 weeks of leave and 37 weeks of pay can be shared and taken flexibly between parents.
But Wallbank said the process is complex and so few parents use it.
“As an employer lawyer my experience is that the take up of shared parental leave has been very low. The complexity of the regime – which many employees and employers don’t understand – and the fact that it effectively takes the leave away from the parent on maternity leave contribute to this poor take up,” said Wallbank.
Under the current regime many, often larger, employers have taken it upon themselves to provide enhanced maternity, paternity, adoption and shared parental entitlements in a bid to support their staff and provide a more attractive array of benefits.
A better and more balanced system would certainly improve the position for many families, particularly on lower incomes, said Wallbank.
But she added a note of caution: “Whilst most people would agree with the idea that giving both parents more time with their families is hugely beneficial, smaller businesses may well be concerned about the burden of extra costs and the pressures on resourcing that this could cause.”
Just Group has the wind behind it – should you invest?
8 of the best houses for sale for around £500,000
