The Telegraph reports that "Ministers plan to exempt small firms from maternity leave rules" as part of the Budget.
If the leak is accurate, businesses with 10 or fewer employees would be exempt from the statutory maternity and paternity leave requirements. Instead, employees would have to negotiate it individually.
Bad for families
The bad for families bit is pretty obvious. A lot of people are employed by small businesses, and if they have to personally negotiate their new parent's leave, they're unlikely to get as good a deal as the statutory leave available to people working for larger businesses.
The statutory requirements are currently:
- Maternity leave, available to the person actually giving birth, is 6 weeks at 90% of salary, then another 33 weeks at the statutory rate (either 90% of salary or £124.88, whichever is lower), then another 13 weeks unpaid.
- Paternity leave, available to one partner of the person giving birth - despite the name, this person need not be male or the father - 2 weeks at the same statutory rate.
There must also be the same or an equivalent job to return to at the end of the leave period.
The maternity leave is relatively generous - though much less than provided by some other European countries - and it might be difficult to negotiate something that good on one's own. In a small business, support from a union is difficult to come by, too.
So, that's a lot of new parents who - at an expensive time in their life - will be getting less financial support because they happened to work for a smaller employer than their neighbours. And, of course, the majority of people who are really much worse off as a result will be women. Typical.
Bad for small businesses
Firstly, negotiating leave like this is extra effort for the employer, too - especially if the employee actually puts up an argument. Make too low an offer, and you might not get your employee back after the leave is over, now that they know the value that you place on their work.
Secondly, at the moment, the government covers the expenses associated with statutory maternity and paternity pay. Businesses making less than £45,000 in class 1 National Insurance contributions annually (roughly: businesses with less than £400,000 in staff salary costs, which will be just about every business with ten or fewer employees) can reclaim from the government 104.5% of the costs of paying statutory pay to the employees.
Yes, that's more than 100% reclaimable. Small businesses actually make a small amount of money - in addition to not having to pay their salary (though that might go on hiring a temp) - by having employees on maternity or paternity leave. This is not a well-known fact.
Furthermore, the reclaiming is done by taking the money out of the income tax the business sends to the government for its employees, so the money is available immediately with no delays.
That's at the moment. The government, however, only refunds statutory pay. If a company - as my employer does - chooses to give a more generous maternity or paternity leave package, then the government only allows the statutory portion to be reclaimed.
Now consider the effect of removing any statutory requirement for small businesses - it goes from being marginally profitable (in reality, this is to cover increased payroll administration costs, rather than actual profit) to costing the business several thousand pounds to keep the same terms.
So small businesses that value their employees and want to keep giving the same terms as before - as generous terms, as with other signs that an employer actually values its employees, make it more likely that employees will return at the end of their leave - might end up several thousand pounds out of pocket as a result.
So who is it good for?
The government balance sheets. If they can stop paying maternity leave to employees of small businesses, that's a fairly large direct cost saving overall. (The indirect costs will probably vastly exceed the saving, of course)
It's a leaked proposal, so the details aren't available, and they might instead retain reimbursement at the statutory rates. But if they do that, the proposal basically does nothing other than aggravate employers and employees. In that situation:
- There's no point in paying less than the statutory rates, if they remain reimbursed for small businesses, because it doesn't cost any more.
- For paternity leave, the length of leave is nothing that employees couldn't reasonably take as holiday anyway. There's not much point in trying to argue it below two weeks.
- For maternity leave, the employee is going to have a child and going to need some time off work as a result. If you try to skip that, you'll just end up with them taking sick leave instead, for which the repayment terms aren't as generous. They'll be away long enough that if your business can't manage without them, you'll need to hire a temp - at which point, unless qualified temps are either much rarer or much more expensive than qualified permanent staff (both unlikely, especially with these unemployment levels), the big hassle of temporarily losing an employee is over and done with.
- But rather than this all being agreed in statute, you have to argue over it with every single employee.
In this alternative case the benefit to the government is that it gets to "cut red tape" (by increasing it) and get a policy boost with the "mothers belong at home" crowd, at no direct financial cost.