Maternity law changes may lead to bigger pension costs

EXCLUSIVE

Changes to maternity law introduced earlier this month could see employers lumbered with huge costs in forking out for unforeseen pension payments for women on maternity leave.

Employment experts have warned that under amendments to the Sex Discrimination Act (SDA) introduced on 6 April, employers could now be liable for pension contributions for as long as a female employee takes maternity leave – up to a year in some cases.

The legislation states that an employer only needs to pay pension contributions for a maximum of 39 weeks. But Kate Gater, partner at law firm Berwin Leighton Paisner, warned that even employees who are not eligible for statutory maternity pay because they have insufficient service could now be entitled to extended pension payments.

Gater said the confusion came from a new definition of ‘remuneration’, added to the SDA (see box). “Potentially, employers are open to claims by employees for pension payments during the whole of their maternity leave,” she told Personnel Today.

“Because the definition states ‘payments’ to the employee as meaning wages or salary, it can be argued that pensions are outside this definition, so an employer would have to continue contributions for both ordinary and additional maternity leave, whether or not the employee is getting statutory pay,” she said.

Equality campaigners have urged the government to clarify the law. Sarah Jackson, chief executive of charity Working Families, said: “This is a good example of why employees and employers alike find maternity leave and pay terribly hard to understand and to implement properly. Maternity legislation really is an area that desperately needs to be simplified.”

Sarah Williams-Gardener, director of campaign group Opportunity Now, was concerned the changes could force employers to rush implementation because they affect mothers with an expected birth date of 5 October 2008 onwards. “It’s really important the government clarifies the issue and gives employers enough time to plan and implement them properly, as they could have significant financial implications.”

A Department for Business spokeswoman insisted the changes made to the SDA would not increase employers’ costs. “When a woman is taking additional maternity leave but is not being paid, the employer is not required to make pension payments for her during this time.”

What were the amendments to the SDA?

The original intention of the SDA amendments was to allow women on maternity leave to claim for their full benefits package, including life insurance, medical cover and company cars, during additional maternity leave – but this excluded pensions.

A business spokeswoman said: “The changes relate to non-paid rights throughout maternity leave, which include benefits such as company cars, gym memberships or other work-related benefits. Pensions are considered a paid right.”

However, the amendments introduced a new definition of renumeration – which lawyers claim excludes pensions – and could leave employers open to claims.

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