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Benefits during maternity leave - confusion reigns!
Following a legal challenge by the Equal Opportunities Commission (EOC) over the Sex Discrimination Act (SDA), with effect from 6 April 2008 the law was changed to remove the distinction between entitlement to non-pay benefits during ordinary maternity leave and during additional maternity leave.
Among the issues raised by the EOC were two points related to the entitlement of women to contractual pay and benefits during ordinary maternity leave (OML) (the first 26 weeks of absence) and additional maternity leave (AML) (the second 26 weeks of absence). The relevant entitlements at issue were:
- During OML, a woman is entitled to all of the terms and conditions of employment that would have applied if she had not been absent, other than her remuneration which is described as "sums payable to an employee by way of wages or salary".
- During AML, a woman is entitled to any terms and conditions of her employment relating to
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- notice of the termination of the employment contract by her employer,
- compensation in the event of redundancy, or
- disciplinary or grievance procedures.
The EOC queried two points about these entitlements because the European Directive does not allow a woman to suffer discrimination in employment because she is on maternity leave, other than in certain permitted situations. The High Court agreed with the EOC's argument that these provisions are discriminatory and, as a result, the Government was obliged to change the relevant legislation. The changes include:
- Clarification of the meaning of "remuneration", and
- The removal of the distinction between entitlement to non-pay benefits during ordinary maternity leave and during additional maternity leave.
Coming into effect for women whose expected week of childbirth is 5th October 2008 or later, the new legislation will require an employer to maintain rights to all their employment benefits, with the exception of remuneration, under the contract of employment for the whole of the statutory maternity leave period.
To date, an employer has been required by law to maintain an employee's entitlement to benefits (other than salary or wages) while on OML, except for pension contributions, which under different legislation, must be maintained for the 39 weeks of paid maternity leave.
However, confusion remains over whether pension counts as “remuneration”, and whether it is something that employers have to provide during maternity leave. “Remuneration” is defined as “the payment of money to an employee by way of wages or salary”, and pension is generally regarded as neither which would mean that employers would have to continue pension contributions for the entire maternity leave period.
Equality campaigners have urged the government to clarify the law. Sarah Jackson, chief executive of charity Working Families, said: "This is a good example of why employees and employers alike find maternity leave and pay terribly hard to understand and to implement properly. Maternity legislation really is an area that desperately needs to be simplified."
Sarah Williams-Gardener, director of campaign group Opportunity Now added. "It's really important the government clarifies the issue and gives employers enough time to plan and implement them properly, as they could have significant financial implications."
According to Personnel Today, a Department for Business spokeswoman insisted the changes made to the SDA would not increase employers' costs. "When a woman is taking additional maternity leave but is not being paid, the employer is not required to make pension payments for her during this time." Lawyers claim that this view is out of step with European law which means that employers who choose not to pay pension for the full duration of maternity leave will be at risk of claims.
This debate demonstrates the increasing pressure on employers to provide full contract rights to employees on maternity leave. We will keep you updated with developments.
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