Child of our time?

The Shared Parental Leave (“SPL”) Regulations 2014 came into force on 1 December 2014 and introduce a new system that allows parents to share a period of leave following the birth of a child or an adoption.

The UK Government intended that the administrative arrangements of the scheme would be “as light touch as possible”. Most employment lawyers who have read the legislation would disagree. It is an incredibly complex piece of employment legislation which is administratively burdensome for employers and employees alike.

The scheme in outline

Employees who are parents are entitled to take SPL in the first year of their child’s life or in the first year after their child’s placement for adoption. The system applies to those children who are due to be born on or after 5 April 2015, or for children who are placed for adoption on or after that date.

The new SPL system makes up to (i) 50 weeks of SPL, and (ii) 37 weeks of shared parental pay (“ShPP”), available for eligible parents to take or share. In other words, parents can share all leave, other than the compulsory leave period of the two weeks following a child’s birth which applies to the mother. SPL works by way of an eligible mother volunteering to end her maternity leave and/or pay early to create a period of leave and pay which she can then share with the child’s father or her partner. Similar SPL rights apply to adoptions, to parents in a surrogacy arrangement and to same-sex partnerships.

SPL is optional, with the default position being that on the birth of a child, the right to take 52 weeks of maternity leave (39 weeks of which is paid) will remain in place for the mother, as will the right for a father to take two weeks’ ordinary paternity leave. The right to unpaid parental leave also remains. However, SPL does replace the current additional paternity leave regime.

Eligibility for SPL

For a parent to be eligible to take SPL, they must be an employee and they must pass the continuity of employment test. In addition, the other parent in the family must meet the employment and earnings test.

Continuity of employment test: the person must have worked for the same employer for at least 26 weeks at the end of the 15th week before the week in which the child is due (or at the week in which an adopter was notified of having been matched with a child for adoption), and be still employed in the first week that SPL is to be taken.

Employment and earnings test: the person must have worked for at least 26 weeks in the 66 weeks leading up to the due date and have earned above the maternity allowance threshold of £30 per week in at least 13 of the 66 weeks.

Where both parents are employees, each may take time off work under the SPL scheme. However, the scheme also applies in wider circumstances, in that one parent can take SPL if they meet the continuity of employment test and the other parent meets the employment and earnings test. For example, where a mother is an employee but the father is self-employed, or unemployed having recently lost his job, the father will not technically qualify for SPL or ShPP as he has no employer. However, if the father meets the employment and earnings test, the mother will be able to access the SPL scheme. This gives her the flexibility of being able to take part of her maternity leave, go back to work, and then take a further period or periods of SPL at a later date, up to 52 weeks after birth.

Where both parents are eligible for SPL, they can take the leave at the same time or separately. Also, each person taking SPL has 20 shared parental leave in touch days (“SPLIT days”), in addition to the mother/adopter’s 10 keep in touch days’ entitlement during maternity or adoption leave. This concept allows a parent to return to work for a short period (or periods) during their SPL without bringing it to an end. However, the legislation does not confer any right on an employer to require that any work is carried out during a period of SPL, and any work that is carried out does not have the effect of extending the total duration of the period of SPL.

Notification requirements

For parents to participate in the SPL scheme, the eligible mother must either return to work or bring her maternity or adoption leave to an end.

A “curtailment notice” must be given at least eight weeks before the date (which cannot occur before the end of the two-week compulsory maternity leave period) on which the mother wishes her leave or pay entitlement to end. At the same time as serving a curtailment notice, the mother must serve either a “notice of entitlement and intention” to take SPL or a declaration that her partner has served such a notice. This notice is a non-binding indication of how and when a parent intends to take periods of SPL, including the start and end dates for each period of leave. It needs to be given at least eight weeks before the start of the first proposed period of SPL, and include a declaration by the other parent taking SPL consenting to the proposal.

To formalise their requested periods of SPL, the employee must, at least eight weeks before the first start date, give their employer “a period of leave notice”. This notice may be served at the same time as the curtailment notice and notice of entitlement, but does not have to be. A notice that requests one continuous period of SPL must be accepted, but where a notice requests discontinuous periods, the employer has two weeks to accept the request, propose alternatives or refuse it. Where the employer refuses the periods requested, the employee may choose to take the total amount of leave requested as a continuous period, or withdraw their original notice.

An employee is entitled to submit three separate notices to book leave. Leave must be taken in complete weeks and may be taken either in a continuous period, which an employer cannot refuse, or in a discontinuous period, which the employer can refuse. If a request for discontinuous leave is refused, the total amount of leave requested in the notice will automatically become a continuous block unless it is withdrawn.

The process involved in dealing with notifications seems onerous, and employers will also have to decide whether to check with a partner’s employer whether what they have been told by their employee is accurate.

Shared parental pay

ShPP is paid at £138.18 or 90% of the employee’s average weekly earnings (whichever is lower). Statutory ShPP increases to £139.58 per week from 5 April 2015. This is the same as statutory maternity pay (“SMP”), except that during the first six weeks after birth, SMP is paid at 90% of whatever the mother earns with no maximum cap. This difference is likely to impact on the takeup of ShPP during the first six weeks (albeit it cannot be taken during the first two weeks, which is compulsory maternity leave).

The impact of shared parental leave?

The UK Government estimates that the initial takeup of SPL will only amount to between 2% and 6% of eligible employees. Given the current rate of ShPP, it seems unlikely that many fathers will take up SPL unless employers offer enhanced pay during SPL, take steps to publicise the right and establish a culture where fathers are encouraged to make use of their rights.

The Government’s stated view in consultation is that employers who enhance maternity pay do not need to enhance ShPP. However, this may not necessarily be correct. The recent case of Shuter v Ford Motor Company Ltd, ET/3203504/13 (30 July 2014) is therefore one for practitioners to keep in mind when advising clients. This case indicated that while not enhancing ShPP where an employer already enhances maternity pay is unlikely to be direct sex discrimination, it could be indirect sex discrimination, which would need to be objectively justified. Not many employers will have the same arguments as Ford had about a male-dominated workforce. Any attempt to objectively justify indirect discrimination cannot be based on costs alone and must be fully supported by detailed evidence and statistics. It seems likely that this issue will attract further judicial scrutiny over the next few years.

There is also the risk that (to avoid the risk of potential indirect sex discrimination claims) some employers who currently offer enhanced benefits may decide to cut enhanced maternity benefits back. If so, the new legislation could be seen as being a law of unintended consequences. Either way, it is clear that an effective and workable SPL system will take some time to establish itself.