Victoria Kerr: Businesses should consider enhanced shared parental pay
Victoria Kerr examines why businesses should consider enhanced shared parental pay.
It has been reported that as one of her last moves before leaving Downing Street, Theresa May will attempt to introduce 12 weeks’ paid paternity leave for new fathers. Separately, the English Court of Appeal recently made a landmark decision on fathers’ pay during shared parental leave.
Two fathers argued at the Court of Appeal that it is discriminatory for employers to pay fathers on shared parental leave less than they would pay mothers on maternity leave. They were unsuccessful, as the court found that as the two types of leave had different purposes, an employer can legally offer enhanced maternity pay without offering enhanced shared parental pay.
Employers’ initial reaction to either story may be the less they have to spend on benefits, the better. However, it would be well worth some more detailed consideration. Currently, new fathers are entitled to two weeks’ paternity leave paid at a statutory rate of pay. They do have the option to take further leave as shared parental leave, but well under 10 per cent of new fathers choose to do so.
A large part of the reason for this may be that, for many families, the father taking shared parental leave makes no financial sense. Many employers offer enhanced maternity pay, but it is currently unusual for employers to offer enhanced pay to those (mostly fathers) taking shared parental leave.
Many employers will have taken comfort from the court ruling, and will be concerned at the prospect of 12 weeks’ paid paternity leave. In times of economic uncertainty it is understandable that they would like to keep their benefits bill as low as possible.
That said, some companies are going above and beyond – there are employers which have already introduced enhanced shared parental pay, with some even deciding to give both parents additional parental leave as well as enhanced pay.
So, what is the incentive for offering increased employee benefits when there is no requirement to do so? There are a number of compelling reasons for businesses to consider introducing enhanced shared parental pay. It demonstrates genuine commitment to gender equality in the workforce and there is also a wealth of evidence showing that gender equality in the workforce has significant financial benefits for businesses.
Employers concerned about cost can draw on the experience of countries which have reduced the gap between maternal and paternal benefits. For example, in Norway the government subsidises parental leave (for both parents) and early childcare. Studies show the cost is more than offset by the GDP increase created by mothers staying in the workforce.
For many UK families, there is a financial imbalance towards the mother taking all available leave after a child is born. Enhanced pay for shared parental leave would help correct this imbalance, giving families more freedom to decide how leave should be split between parents. We have clients who have introduced enhanced shared parental pay and have seen a significant uptake in the amount of fathers taking shared parental leave.
But why is childcare a business issue? Evidence shows that a business financially benefits from gender diversity at all levels of seniority. It has been also shown that childcare being unequally shared is a key reason for women being underrepresented at senior levels.
As well as the financial impact, having few women at senior levels has a large impact on gender pay gap figures. Companies with over 250 employees must annually publish their gender pay gap. A large gender pay gap can cause reputational issues, and make it more difficult to attract new talent (Equality and Human Rights Commission figures show 61 per cent of female job applicants consider a company’s gender pay gap). This is particularly so within industries perceived to be male-dominated and introducing enhanced shared parental pay is a practical step employers can take to show they are serious about addressing their gender pay gap.
Businesses that are serious about equal opportunities understand that it is not always about meeting the legal minimum requirements but instead looking to initiatives which help remove barriers to equality. Such an enlightened approach not only supports greater employee engagement and a genuine commitment to solving the gender pay gap issue, but could also prove to be an important tool in terms of staff recruitment and in the retention of talented employees who could be tempted look elsewhere.
Victoria Kerr is an associate at Pinsent Masons