Work – Life Balance: Weighing up the benefits and costs of the new parental leave entitlements

24-06-2019

Authors: Louise O’Byrne and and Helen Webb.

Click here to view the briefing in PDF format.

It would be hard to have missed the Government’s recent drive towards improved family entitlements, with the introduction of increased unpaid parental leave and the announcement that paid parental leave is on the way.

No one would argue against the importance and benefit of both parents spending time with their children. But, inevitably there are costs involved. Will these costs fall upon employers? Should employers enhance family benefits in any event to support the families of their employees, attract and retain talent, and improve diversity within the workplace?

We set out below the new parental entitlements employers will have to provide, and some of the factors to take in to account when considering what family benefits to offer your employees.

The new entitlements

Parental leave
Unpaid parental leave is not new. Under the Parental Leave Act 1998, parents of children up to 8 years old (or 16 years old where the child has a disability) are currently entitled to 18 weeks of unpaid parental leave provided they have one year’s service with their employer. What is new under the Parental Leave (Amendment) Act 2019, is the length of leave parents will be able to take, and how long the entitlement is potentially available to the employee. In brief:

  • The parental leave entitlement is set to increase from 18 weeks to 26 weeks.
  • The increase is being introduced gradually – the entitlement will be 22 weeks of parental leave from 1 September 2019 – 31 August 2020, before increasing to 26 weeks from 1 September 2020 onwards. Employees who have already taken their current entitlement will be able to take the additional 8 weeks of leave provided they meet the eligibility requirements.
  • The leave may now be taken at any time prior to the child turning 12 years old rather than 8 years old.

What does this mean for employers? In the first instance, we recommend employers update parental leave policies to reflect the changes being introduced. Employers also need to put in place a process for keeping parental leave records which must be retained for 12 years. Employers will continue to have the ability to postpone an application for parental leave where there may be a substantial adverse effect on the business, but the entitlement cannot be denied.

It remains to be seen whether the increase in this entitlement will lead to any change in uptake. Uptake of parental leave has historically been low given it is unpaid and requires families to be able to live on savings or one salary. During the Seanad debate for the Act, it was suggested that uptake by men is as low as 5% and it is difficult to see how extending the period of leave will improve this.

Parental leave – the paid entitlement
The proposed parental leave entitlement which may have more impact, is the introduction of paid parental leave for both parents. To avoid confusing this proposal with unpaid parental leave (as discussed above), we shall call it “Baby Leave” on the basis this type of parental leave has to be taken within 52 weeks of the child’s birth or placement for adoption.

To date, the Government has only published the General Scheme for the Parental Leave and Benefit Bill 2019, and regulations will supplement this Act when passed. Under the General Scheme, it is proposed:

  • A parent who has one year’s continuous service with their employer shall be entitled to take Baby Leave for children born or placed for adoption on or after 1 November 2019.
  • Baby Leave must be taken after birth or placement for adoption and must be taken within 52 weeks of birth or placement.
  • Each parent must “use it or lose it” – the entitlement cannot be transferred.
  • The State will pay Baby Leave benefit at the rate of €245 per week, provided the employee has made sufficient PRSI contributions.
  • Baby Leave must be taken in periods of not less than one week.
  • Baby Leave may be taken before additional maternity or adoptive leave.
  • All employment rights are retained whilst an employee is on Baby Leave and employees on Baby Leave cannot be dismissed from their employment, put on notice of termination or suspended.
  • Employers must maintain records of Baby Leave for 8 years and failure to do so may lead to summary conviction and a class B fine.

The length of Baby Leave will be set by regulations but the Minister for Employment Affairs and Social Protection has announced it will commence at two weeks’ paid leave and shall increase incrementally up to seven weeks’ leave by 2021.

On the basis Baby Leave is a paid benefit, it is more likely to be used by employees than parental leave. Although to what extent Baby Leave will be taken, and whether it will be used by one gender more than another, only time will tell. Figures released in relation to paternity leave take up as compared to the number of births, indicate approximately 60% of new fathers do not take up this benefit. This is a crude statistic and does not take into account that certain fathers may be unable to take the benefit. However, it is believed that concerns regarding career and a substantial dip in pay during paternity leave (if there is no enhancement to the State payment) are likely to have a bearing on uptake. Both of these concerns would be replicated in relation to Baby Leave.

Employers should start to consider how they can prepare for Baby Leave. Again a process for keeping records will need to be set up, new policies and notification procedures may need to be prepared, and an analysis of whether cover will be required if parents take Baby Leave in addition to other existing entitlements should be carried out.

Should employers enhance the new parental entitlements?

Some business representative groups are already expressing concern about the impact of Baby Leave on small businesses. Potential costs highlighted include lost productivity, administration costs, and potential short term recruitment/cover costs. It is also suggested there will be pressure to top up the Baby Leave payment. But should employers actively be considering enhancing the new parental entitlements in any event?

Parental leave has been in place for over 20 years and it is highly unlikely that any employers will start to feel pressure to offer payment during this period of leave.

However, over the last 5 years there has unquestionably been a move by a number of employers to enhance parental leave entitlements and pay during the first year of a child’s life or following placement for adoption. Large tech employers have led the way and a number offer equivalent paid leave periods for any new parent whether they are a mother or father. Diageo also recently announced its new family benefit of 26 weeks fully paid leave for all of its employees entitled to take maternity leave, paternity leave, adoption/surrogacy leave. Microsoft has been said to have gone even further and requires certain minimum parental entitlements by its suppliers too.

What about smaller employers? IBEC’s HR Report 2018, which received survey responses from 231 employer organisations, found that 41% of respondents already enhance maternity pay to full pay for 26 weeks of maternity leave and a further 19.5% provide a lesser enhancement. 39% of respondents to the survey also top up paternity pay to full pay for the two week leave period. There is no doubt that employers are increasingly enhancing new parental entitlements.

Is there a discrimination argument which means employers must enhance pay during Baby Leave (which can be taken by men or women) so that it is comparable with enhanced maternity pay? A similar question to this has recently been addressed by the Court of Appeal of England and Walesin the combined cases of Hextall v Leicestershire Police and Capita Customer Management Limited v Ali and another. In these cases, male claimants alleged discrimination and/or a breach of the equality clause in their contract when their employer did not provide equivalent enhancements to shared parental leave pay as maternity pay. In the UK, under the Shared Parental Leave entitlement a mother or primary adopter may end their maternity or adoption leave and share any untaken leave or statutory pay entitlement with the other parent as shared parental leave and pay. While many employers enhance maternity and adoption pay, the majority do not enhance shared parental leave pay above the statutory level.

The Court of Appeal found that different rates of pay for mothers on maternity leave and fathers on shared parental leave is not unlawful sex discrimination on a direct or indirect basis and it does not breach equal pay requirements.

The Court of Appeal held there had not been direct discrimination in the Ali case because Mr Ali’s circumstances were materially different from the circumstances of mothers on maternity leave. Maternity leave and pay are afforded to new mothers to assist them with recovering from the physical and psychological effects of pregnancy and childbirth. The proper comparator for Mr Ali was a female employee on shared parental leave, and, as such, there was no difference in the treatment between Mr Ali and such an employee.

In the Hextall case, the male employee argued that there was a breach of his terms of work as modified by the sex equality clause implied by the Equality Act 2010. An equivalent provision is contained in section 21 of the Irish Employment Equaliy Acts 1998 to 2015. Mr Hextall’s claim was that his terms of work had been modified by the sex equality clause to include a term entitling him to take leave to care for his newborn baby at the same rate of pay as mothers taking maternity leave. The Court of Appeal found that this claim failed because the Equality Act provides that the sex equality clause does not have effect in relation to terms of work affording special treatment to women in connection with pregnancy or childbirth. S26 of the Irish Employment Equality Act, 1998 to 2015 also allows employers to “confer benefits on women in connection with pregnancy and maternity (including breast – feeding) or adoption.”

The Court held it did not need to rule in relation to indirect discrimination, but commented that had it been relevant, the indirect discrimination claim would also have failed – the material difference between Mr Hextall and a new mother meant there was no valid comparison between them for the purposes of establishing a particular disadvantage to male employees.

Permission to appeal is being sought in both cases. For now at least, it is likely that the Irish courts would draw similar conclusions to the Court of Appeal of England and Wales and employers will not be obliged to enhance Baby Leave pay to the same level as maternity pay.

Whether or not employers should enhance family benefits is a commercial question for each individual employer to decide. While it is difficult to gather evidence regarding the positive impacts felt by employers who enhance parental entitlements, suggested benefits include:

  • Attraction of top talent – by creating a culture which recognises and respects that employees have full lives outside of work means you attract top prospective talent, particularly within millennials who prioritise flexibility and social responsibility from their employers.
  • Improved employee retention and reduction of turnover – employees who are provided with time to bond with their children and support to establish family routines are less likely to leave, reducing recruitment costs and improving productivity.
  • Improved diversity – childcare still falls predominantly on women and enhanced parental entitlements means female talent is more likely to be retained.
  • Improved employee well-being – by providing employees with time to spend with their family, it improves their health and emotional well-being potentially reducing sickness absence.
  • Strengthened employee loyalty and morale.

Perhaps the main question employers should ask themselves, is can they afford not to provide attractive parental entitlements?

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