Legal opinion: EU proposals to extend maternity pay

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Never mind the recession or the damage to the planet; according to the European Parliament it’s all about the falling birth rate. Or so said a spokeswoman for the European Parliament as she sought to explain the Parliament’s vote in October 2010 to extend maternity leave to 20 weeks on full pay.

Going beyond the Commission’s original proposal of 18 weeks’ paid maternity leave, the Parliament also adopted amendments to extend the ban on the dismissal of pregnant workers (except in exceptional circumstances, which are permitted under national legislation) to last from the beginning of a pregnancy to at least six months beyond the end of maternity leave.

As might have been anticipated, these proposals were greeted with a mixture of horror and disbelief by both the coalition Government and UK business leaders. Concerns have been expressed that the new proposals will deter employers from employing women of child-bearing age.

The current UK rules, in place since 1992, give women a full year of maternity leave, with six weeks paid at 90% of the employee’s average pay, followed by 33 weeks on statutory maternity pay, which is currently £124.88 per week. This puts the UK pretty much at the bottom of European league tables, with only Greece and Luxembourg having lower rates of maternity pay.

As things stand, however, it will be Government rather than employers who will meet the bill, as employers currently reclaim between 92% and 105% of maternity pay at a cost of £2 billion per year. Under the new proposals this is estimated to increase to £4 billion.

Key points

  • The European Parliament has voted to update the Pregnant Workers Directive to extend minimum provision for maternity leave to 20 weeks on full pay.
  • Low-paid women could be worse off under the proposals than under the current UK rules.
  • The proposals will now pass to the Council of Ministers in Brussels who will decide whether to accept or reject the amendments.

What is the proposition?

Under the new proposals, employers would be compelled to pay 100% of salary, based on actual earnings for a 20-week period. The proposals do not include any increase in the duration of maternity leave or alter the provisions relating to lower level statutory maternity pay. The proposal is also silent as to who will bear the burden of increased funding and costs.

Who benefits?

The European Women’s Lobby described themselves as “absolutely thrilled” with the proposal. However, in the UK, enthusiasm has been muted with both left and right of the political spectrum raising concerns. Employment relations minister Edward Davey described the proposals as: “regressive, as most of the additional money will go to the highest paid women”.

Currently, women make up a large percentage of workers who are in receipt of the national minimum wage. The proposals could place these poorer workers at a severe financial disadvantage. Women on the national minimum wage of £5.93 per hour could be worse off with 20 weeks’ maternity leave on full pay than under the current British system of six weeks at 90% and 33 weeks at £124.88, depending on the number of hours they work per week, and on the length of maternity leave that they take.

The impact on higher paid women is more variable. At the moment, a number of employers already pay in excess of the statutory minimum maternity pay. An IDS survey published in November 2009 found that 74% of companies paid greater than statutory or otherwise enhanced maternity pay. It also found that 52% of respondents felt that current levels of statutory maternity pay were too low.

Another group who may benefit are those women who are entitled to receive a contractual bonus. Currently, employers are entitled to reduce any bonus payment by the amount of time taken on maternity leave with the exception of the two week compulsory maternity leave period. The new arrangements, which include a proposal to increase the compulsory maternity leave period to six weeks, would increase contractual bonus entitlement.

So what happens next?

20 weeks of full-paid maternity leave may not be round the corner. Even if the proposals are adopted, the likelihood is that they will not be implemented into UK legislation until 2015.

The draft Directive will now pass to the Council of Ministers in Brussels who will decide whether to accept or reject the amendments. A decision from the council is expected in December 2010. As might be expected from a body comprising all the EU member states, proposals are frequently rejected. As a health and safety measure, the Directive can be passed by qualified majority voting, but there are already strong rumours that this will not be agreed.

Catherine Wilson, partner, Thomas Eggar LLP

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