News

September 24, 2010

Maternity leave extension too costly for small firms, warns BCC

EU plans to extend maternity leave to 20 weeks on full pay will be too costly for small firms to implement, the British Chambers of Commerce (BCC) has warned.

Currently, women in the UK are entitled to take a year off work for maternity leave. Employers are only required to pay six weeks’ salary at 90 per cent of their average earnings, and then the employee can receive 33 weeks of statutory maternity pay, with the remaining weeks unpaid.

However, draft legislation has been passed by a committee of the European Parliament to extend statutory maternity leave to 20 weeks on full pay. MEPs will vote on the proposal next month. If approved, they will set a date by which the regulations would be introduced in the UK.

BCC policy adviser, Abigail Morris, said that the extension to maternity leave would be a burden on small businesses.

“An impact assessment by the European Parliament found that the changes would cost the UK £2.5 billion per year, and given all the cuts that are being made we are not sure where this money will come from,” she said. “The Government may just pass the cost on directly to businesses, and if not they will have to pay more in taxes to fund it.

“Increasing it to 20 weeks at full pay might also encourage the minority of women who don’t already take 20 weeks to do so, which puts more pressure on small firms,” added Morris.  

The impact assessment states: “the economic costs for society may also be reduced by laying the burden of improved maternity leave schemes on the employers. If all the additional compensation is paid by the employers, the tax distortion costs will be eliminated, and the production loss and saved childcare costs will be left as the only economic costs.”

Campaign charity Working Families rights adviser, Cathy Rogan, said that the changes to maternity leave would not make much difference to small employers, as many already voluntarily fund female employees at full pay for longer than the minimum legal limit.

“Statutory maternity pay at the moment is also reclaimed by small-business owners from the Government,” she added. “So if the Government decides to pay for the extended leave, it will make no difference to business owners.”

• To find out more about maternity leave obligations, visit the Law Donut