Summary

Given the recent birth of His Royal Highness Prince George of Cambridge, many employment lawyers and HR professionals surely turned their attention to the maternity and paternity rights of the new parents. Unfortunately for the Duchess of Cambridge, she may not meet most of the eligibility criteria, but her husband has allegedly availed himself of his right to paternity leave.

This briefing summarises the current law and practice in this area by reference to eight key issues. It covers the basic legal entitlements and also looks at those areas that are more ‘grey’ in terms of employee rights and employer obligations.

Key issues

1. Rights before maternity leave starts

Female employees are given additional protection and rights under law from the moment they notify their employer of their pregnancy.

Many maternity rights are calculated by reference to the ‘expected week of childbirth’
(the EWC). As the name suggests, this is the week (Sunday to Sunday) in which the employee
is due to give birth.

Notification

An employee must notify her employer that she is pregnant no later than the end of the 15th week before the EWC (ie if the EWC is week 40 then the employee must notify the
employer that she is pregnant by no later than the end of week 25).

She must also tell the employer her EWC and the date she intends her maternity leave to start, which must be no earlier than the beginning of the 11th week before the EWC.

Many employees will notify their employer prior to this date so as to benefit from paid time off for antenatal classes, to ensure that appropriate health and safety adjustments can be 
made if required or to trigger protection from discrimination on the grounds of pregnancy. 
If an employee does not notify the employer within the prescribed timeframes then she will 
have no right to maternity leave nor some of the rights during that leave. She will, however, retain protection against discrimination on grounds of pregnancy or maternity and the right
to other benefits such as statutory maternity pay.

Discrimination

Pregnancy and maternity is a ‘protected characteristic’ for the purposes of discrimination law. There is no limit on the compensation that an employment tribunal can award for unlawful discrimination.

In particular, if an employee is treated unfavourably because of a pregnancy-related illness then this will constitute discrimination and, if the treatment involves dismissal, that
dismissal will be automatically unfair.

Health and safety

Employers are under a general obligation to assess the health and safety risks to which all of
their employees are exposed at work. For women of child-bearing age, who do work that could involve risk to the health and safety of a new or expectant mother or her baby, a risk assessment should include an assessment of those risks.

The Health and Safety Executive considers that specific risks for women of child-bearing age include working hours, stress, working alone, noise, movements/postures and temperature extremes.

Importantly, there is no obligation to do anything about identified risks until the employer has been notified that the employee is pregnant. Once so notified, the employer must take reasonable steps to remove or prevent exposure to any significant risk and tell the employee what it has done. If the risk cannot be avoided then the employer will need to consider amending the employee’s working conditions or hours, offer suitable alternative work or even permit the employee to remain away from work on full pay if a suitable adjustment cannot be made.

The employer is also unlikely to be able to reduce or amend the employee’s pay or benefits during a period in which her working arrangements are changed. If she is offered suitable alternative work then the employer may be able to pay her at a level commensurate with the
new role, but this is not without risk of challenge if the new terms are less favourable than before.

Importantly the employee cannot be required to take sick leave if there is a health and safety issue that cannot be remedied by the employer.

Antenatal care

Expectant mothers may take reasonable paid time off during their working day for antenatal
care. This includes medical appointments and antenatal and parenting classes, provided they are recommended by a health professional. There is no corollary right for male employees to take time off for such appointments, though some employers do agree to this as a matter of internal policy.

2. Maternity and paternity leave

Statutory maternity leave lasts for up to 52 weeks and the employer must tell the employee of the date on which her maternity leave will end.

The 52 weeks is broken down into two equal periods of 26 weeks, the first being ‘ordinary maternity leave’ (OML) and the second ‘additional maternity leave’ (AML). Within OML, the employee must take a minimum of two weeks’ compulsory maternity leave and it is a criminal offence for an employer to allow an employee to work during this two-week period.

Ordinary statutory paternity leave, in comparison, lasts only for up to two consecutive weeks. Fathers may take up to 26 weeks’ additional paternity leave (APL). However, if APL is taken,
(i) APL must be exhausted within a period of time starting 20 weeks after, and ending 12 months after, the baby’s date of birth and (ii) the individual’s spouse, civil partner or
partner must have returned to work from their own statutory maternity leave.

3. Maternity and paternity pay

Maternity pay

Pregnant employees may be eligible to receive statutory maternity pay (SMP). They may also receive enhanced contractual maternity pay if the employer so chooses. The employer can recover almost all SMP through HMRC by deduction from other payments due to the tax man.

To be eligible for SMP an employee must:

  • have been continuously employed for at least 26 weeks by the end of the 15th week before her EWC;
  • have normal weekly earnings that are not less than the lower earnings limit for national insurance purposes (this is a fairly complicated calculation but will normally be met for anyone other than the very low paid. The government provides a useful SMP calculator on its website);
  • still be pregnant or have given birth 11 weeks before the EWC; and
  • have stopped working.

The employee must also have notified the employer in advance of the date on which she  intends SMP to start and have confirmed her EWC.

It is an intentional quirk of the legislation that employees who meet the eligibility criteria but subsequently resign – or are dismissed – remain entitled to receive SMP. The requirement to have stopped working captures termination of employment and it does not matter if the employee was sacked for misconduct.

Agency workers are also eligible to receive SMP if they meet the qualifying criteria, but do not necessarily have a right to take maternity leave. The obligation to provide SMP falls on the agency, rather than the end user. This means that to receive SMP agency workers will have to turn down placements so as to satisfy the criterion of having stopped work.

SMP is paid at two rates: (i) for the first six weeks at 90 per cent of the employee’s normal weekly earnings; and (ii) for the next 33 weeks at the lower of a prescribed rate set by the
government and the employee’s normal weekly earnings. The prescribed rate is currently £135.45 per week. The payments are all subject to deductions for tax and national insurance.

Women who are not eligible to receive SMP (because, for example, they do not have sufficient service or are self-employed) may be eligible to receive maternity allowance from Jobcentre
Plus and it is good practice to notify the relevant employees of this at the time.

Enhanced maternity pay

Employers can choose to give maternity pay that exceeds SMP. The most common enhancement is to pay full or part-time salary for some or all of the maternity leave.

Enhanced maternity pay can be paid ‘with strings attached’. Employers generally want to encourage employees to return to work and many have come up with different approaches to achieving that aim. Some are common, others less so and include:

  • requiring the employee to repay some or all of her enhanced maternity pay if she does
    not return to work for a set length of time, say, six months; and/or
  • offering an ex gratia payment or additional bonus to an employee who comes back to
    work from maternity leave early (but not of course during the compulsory maternity
    leave period); and/or
  • not paying enhanced maternity pay if the employee falls pregnant again within a set
    period of time; and/or
  • setting a longer qualifying period to be eligible for the enhanced pay, ie longer than the 26 weeks for SMP.

Whilst these schemes may discourage consecutive maternity leaves, they can also be the subject of criticism on the grounds that they may have the effect of discouraging women from having their children over a short period of time so as not to interrupt their career development. This is a policy decision for the employer.

Paternity pay

Statutory paternity pay (SPP) operates slightly differently from SMP. It is paid at the lesser of 90 per cent of normal weekly earnings and the government’s prescribed rate. The prescribed rate is identical to that for SMP (£135.45) but is payable only for up to two weeks.

The father may be eligible for additional statutory paternity pay to cover any period of time
spent on APL.

4. Rights that continue and rights that do not

Under the legislation, an employee on maternity leave (whether OML or AML) is entitled to all her usual benefits except her remuneration. Remuneration for that period is replaced by SMP and, if relevant, contractual maternity pay. The definition of ‘remuneration’ is ‘wages or salary’ and it remains unclear whether this captures particular payments. Our views on four
‘tricky’ areas – pensions, bonuses share schemes and childcare vouchers – are set out in brief below.

Pensions

The Equality Act 2010 (the Act) provides that during: (i) periods of OML (whether paid or unpaid) and (ii) paid periods of AML, employees on maternity leave must continue to accrue rights in an occupational pension scheme. The impact of the Act for employers depends on the type of occupational pension scheme that is operated.

For employers operating defined benefit schemes, the employee must continue to accrue pensionable service as if she were at work. If the scheme requires member contributions to be made, the contributions can only be calculated by reference to pay actually received by the employee (ie her statutory/contractual maternity pay), and not her usual salary. For the
employer of a defined benefit scheme, therefore, while there may be no immediate impact on funding obligations (as employer contributions will continue as scheduled under the latest schedule of contributions) if there is a reduction in member contributions received during the period of maternity leave, any resulting shortfall in funding the corresponding pension benefit will ultimately fall on the employer.

For employers operating defined contribution schemes, employer contributions will continue
as usual during this time (ie based on the employee’s usual salary level). Employee contributions will again be based on the actual rate of pay during the period of leave. Employees should be reminded that they may wish to ‘top up’ their contributions, as their accounts will receive less contributions during that period so they do not suffer a shortfall.

During unpaid periods of AML the Act does not require employers to continue to provide for the accrual of pension rights in an occupational pension scheme, so the above will not apply.

It is interesting to note that while the intention of the Act was to consolidate the existing legislation in this area, the legislation no longer covers personal pension schemes. The reason for the omission is unclear, although as a matter of practice it is likely that most employers will have retained their existing pension arrangements for those on maternity leave (ie not
distinguishing between occupational and personal pension schemes). Strictly speaking
however, personal pension schemes are exempt from the Act’s regime.

Bonuses

This is a grey area. Pro-rata bonuses, whether contractual or discretionary, are payable in
respect of the period before maternity leave started, in respect of the two-week compulsory maternity leave period and for any period after returning to work.

Discretionary bonuses are – oddly – less likely to fall within the definition of ‘remuneration’ and so there are prospects of arguing they are payable during OML and AML. In view of the lack of clarity as to the legal requirements in respect of discretionary bonus, employers often
develop a policy that applies a discount to reflect time not spent at work during the relevant bonus year, so that employees do not receive a full bonus payment for the entire period of leave. Often employees will not document this approach, but rather it will exist as an unwritten policy or practice, so that it can be flexed to adapt to specific circumstances.

A pure contractual bonus should rightly be classed as ‘remuneration’ and as such is not payable during maternity leave.

Share schemes

Rights to share and option awards that form terms and conditions of employment should continue throughout OML and AML. This is because benefits under share schemes are unlikely to fall within the definition of ‘remuneration’.

Deductions should still be made from employees’ net salaries to fund HMRC approved savings-related schemes (such as Sharesave) and from gross salaries to buy partnership shares under an approved share incentive plan, unless in either case there are insufficient funds or the employee chooses to stop those contributions.

Childcare vouchers

Employers may provide childcare vouchers to employees, which is a tax-efficient way to pay for childcare. Very often the vouchers are paid for by the employee out of pre-tax gross salary by way of salary sacrifice.

HMRC has issued guidance that childcare vouchers do not constitute ‘remuneration’ and so should continue to be provided during OML or AML. Although there has been no case law on this point and HMRC’s guidance is non-binding, given childcare vouchers are not provided in
cash and cannot be converted into cash, they do not necessarily fit a ‘common sense’ understanding of remuneration. Employers could take the view that they do not need to continue to provide childcare vouchers during maternity leave, but this approach is vulnerable to legal challenge.

The most technical aspect of childcare vouchers is the interaction with salary sacrifice arrangements. Because salary sacrifice amounts to a contractual reduction in an employee’s gross salary, employers may find that they have to continue to fund childcare vouchers even
when the employee is receiving only SMP (or no maternity pay at all). This is a complicated area and will depend in part on the terms of the salary sacrifice.

The government has announced plans to introduce a new government-funded tax-free
childcare system from 2015, which is expected to replace childcare vouchers over time.

5. KIT days

A mother may work for up to 10 ‘keeping in touch’ days (KIT days) during her maternity leave
without bringing her OML or AML to an end. This is in addition to the reasonable contact that an employer can make with an employee on maternity leave (for example, to discuss her return to work). An employer cannot compel an employee to work a KIT day, although employees should see them as a useful way of remaining in contact with the employer and feeling part of a team.

Payment for KIT days is something to be agreed between the employer and the employee and should be documented in writing. KIT day payments may be offset against the relevant week’s total SMP (and not just the amount of SMP for that day). In practice, most employees are unlikely to attend a KIT day unless they are paid their normal contractual daily rate of pay, although this potentially misses the point of KIT days.

6. Redundancies during maternity or paternity leave

Employees can be made redundant while on maternity or paternity leave. However, particular care should be taken. The relevant employee should be included as normal in the selection process and invited to relevant consultation meetings. The employer should take steps to be flexible as to the timing and location of the consultation meetings, particularly if the employee is heavily pregnant or has only just given birth.

Employers have an obligation to look for suitable alternative employment for all employees as part of a redundancy exercise. However, employees on maternity leave take priority over other ‘at risk’ employees if a position comes up, including at associated companies. If the employee is not prioritised and is subsequently dismissed then she will have a claim for automatic unfair dismissal.

If an employee is dismissed because of her pregnancy, birth or maternity leave, the dismissal will be automatically unfair. There will also be a strong claim for unlawful discrimination.

Statutory redundancy pay should be calculated by reference to the employee’s normal salary and not their maternity or paternity pay.

Note that the employee must continue to be paid her SMP even once the dismissal takes effect.

Fathers who take just the standard two weeks’ paternity leave are likely to be back in the workplace before redundancy consultation is completed. They should be able to be included in the process as normal.

7. Return to work

Unless there has been a redundancy exercise, a female employee who takes only OML is entitled to return to the same job that she had before going on leave. There is some, albeit limited, scope for flexibility here. The question is whether the job is within the normal ‘range of variability’ that the employee could reasonably have expected under the terms of her employment contract.

If the employee has taken a period of AML then she is also entitled to return to the same job, unless it is not reasonably practicable to do so. This typically arises when there has been some form of reorganisation or restructuring with no resultant redundancies. In this situation, the employee still has a right not to be treated less favourably and any alternative job must be suitable for her and appropriate in the circumstances.

Often employers can assume that there is more flexibility on a return from AML than is in fact the case. In practice the flexibility to offer an alternative role is limited and employers need to tread carefully to ensure that business decisions not to permit a maternity returner back to her old role are challenged and defensible. The onus is on the employer to demonstrate that it is not reasonably practicable for the employee to return from AML to the same job.

8. Flexible working and parental leave

Once an employee has children, they may wish to avail themselves of two particular rights:

Flexible working

All employees with children, who meet certain eligibility criteria, have a right to request to work flexibly. An employee returning from maternity or paternity leave may, for example, request a change to the hours they work, a change to the times they are required to work or to work from a different location. Both the employee and the employer must follow a statutory procedure for making and dealing with a formal request for flexible working. Broadly speaking, this requires the employer to deal with a flexible working request within a prescribed time period.

The employer does not have to accept a request for flexible working, but may only refuse such a request for prescribed reasons. Valid reasons for refusing such a request include the burden of additional costs to accommodate the request, a detrimental effect on the ability of the employer to meet customer demand and a detrimental impact on the employee’s performance. The employer must give sufficient explanation as to why the chosen grounds for refusal apply. An employee may have a claim for unlawful sex discrimination or constructive dismissal if a request for flexible working is turned down without proper consideration.

Parental leave

Each employee with responsibility for a child may take up to a total of 18 weeks’ unpaid parental leave per child, up to a maximum of four weeks per year. This leave is ‘attached’ to the employee and so the 18-week per child maximum is not refreshed if they change employer.