Background

Maternity rights are changing for employees who are due to give birth on or after 5 October 2008. The effect of the change will be to erode the difference between ordinary and additional maternity leave.

What is changing?

The distinction between the benefits women receive during ordinary maternity leave (“OML”) and additional maternity leave (“AML”) will be removed. Currently the position is as follows:

OML – remain entitled to terms and conditions of employment (includes non-contractual benefits that are connected with the employment), except remuneration;

AML – subject to limited exceptions, no entitlement to terms and conditions of employment (the obligation of trust and confidence, disciplinary and grievance procedures, notice and contractual redundancy grievance continue).

This means that, unless the employer provides enhanced entitlements, women on AML do not currently receive valuable benefits such as private health care or employer pension contributions.

From 5 October 2008 - the position will be the same during OML and AML – women will be entitled to the benefit of all terms and conditions, except remuneration.

When will this change take effect?

Employers are required to provide these increased benefits to employees whose expected week of childbirth (“EWC”) starts on or after 5 October 2008.

If a woman with an EWC of 5 October or after gives birth early, she will still be entitled to the new rights during AML. Employers should make use of the intervening time (and perhaps the quieter summer months) to ensure that their documentation and working practices will be legally compliant, and financially acceptable, once the revised legislation comes into effect.

What will this mean for employers?

The key points to note are:

the position in relation to remuneration (ie wages including bonus) will not change – a woman will not receive it during OML or AML;

all other contractual benefits must be provided during OML and AML. This includes benefits expressly referred to in the contract of employment (eg mobile telephones, company cars and gym membership) and benefits that have achieved contractual status through custom and practice (eg a Christmas bonus);

employees will be entitled to accrue both statutory and contractual holiday during both OML and AML;

an employer which operates a salary sacrifice flex arrangement will also be affected. It will be obliged to provide the relevant benefits to the employee during OML and AML even though the employee is (probably) not being paid during part of AML. HMRC have issued guidance clarifying that, under a salary sacrifice arrangement, the entitlement to receive benefits is not affected by the receipt of salary. The employee and employer have agreed to reduce base salary and, instead, the employee will receive non-cash benefits;

employers who provide a generous benefits package will be disadvantaged. Employers who provide few benefits but pay a higher base salary will be relatively unaffected. Salary will not have to be paid during AML;

this change may make taking the full 12 months’ maternity leave more attractive;

the position on pension contributions during the 13 week unpaid period of AML is still subject to the issuance of further guidance. We will issue a separate alert on the pensions piece when the position has been clarified.

What should employers do before 5 October 2008?

  • Review all documentation relating to maternity leave to ensure:

(i) that they reflect the changes to entitlements; and

(ii) that existing enhanced maternity pay arrangements will work post-October. Do you want to pay enhanced maternity pay during AML if you are also having to provide benefits for longer than bargained for?

  • Conduct a financial analysis of the additional cost which will be incurred. For some employers this may be less than it may first seem. In practice, an employer may not take a woman on maternity leave off some benefit schedules – the premium has been paid 12 months in advance and the admin makes it burdensome. In this case, there will be no change. However, for others, perhaps in a female dominated workplace, the cost may be high and may prompt the employer to consider eschewing benefits in favour of a higher base salary.