More Changes to Maternity Benefits

Rules regarding Maternity Leave and benefits are changing for women whose children are due on or after 5 October 2008. The pratical effect is to change most of the differences between Ordinary Maternity Leave and Additional Maternity Leave.

Maternity Leave lasts one year, split into six months of Ordinary Maternity Leave (OML) and six months of Additional Maternity Leave (AML).

During OML, new mothers are given the right to all the terms and conditions in their contract but pay. This includes non-pay contractual terms and conditions such as cars, laptops, phones and gym membership. If returning after OML, mothers are entitled to return to their pre-maternity role.

Most mothers take advantage of AML and remain with their child for the whole year before returning to work. However, many of them are unaware that returning from AML only entitles them to the trust and confidence that a role will still exist; effectively retaining the right to return to a job of similar status and pay, rather than exactly the same job.

This distinction has been blurred somewhat by the recent increase in the payable period of Statutory Maternity Pay and Maternity Allowance to 39 weeks from 26 weeks. The previous period of 26 weeks mirrored OML. Many mothers, in these circumstances, may perceive OML as lasting 39 weeks, but this is not the case and the split remains at 26 weeks for OML and AML.

However, new mothers were not entitled to receive the benefit of any non-pay contractual terms during AML. This will change for babies due on or after 5 October 2008. While new mothers retain these benefits, there is nothing in the legislation to state that they have retained the right to return to exactly the same job after AML.

Summary of changes to Maternity Benefit

• Ordinary Maternity Leave - 26 Weeks
• Additional Maternity Leave - 26 Weeks
• Statutory Maternity Pay - 39 Weeks
• Maternity Allowance - 39 Weeks
• Non-pay benefits - Gym membership; car; laptop; childcare vouchers.Receivable during Ordinary Maternity Leave an Additional Maternity Leave – for children due on or after 5 October 2008.

So how will this affect the employer?

For the majority of benefits, the extra cost will be marginal as you will already be locked in to paying a car lease for a fixed period, which may include the period of Maternity Leave. This will be the same if you lease a laptop or a phone. If you have paid for the equipment, the capital costs will already have been budgeted and accounted for.

However, one benefit you may provide could cost you. Many employers provide childcare vouchers and do so via a salary sacrifice scheme. These schemes usually work with the employee taking a lower salary before tax and receiving an amount of childcare vouchers equivalent to the amount of salary given up.

Many employers make the assumption that the employee buys the childcare vouchers with the amount of salary they are giving up; effectively making a deduction from salary to pay for the vouchers. This is not the case and in May, the Inland Revenue issued guidance on this specific issue.

Salary sacrifice changes an employee’s remuneration to a lower salary and the equivalent value of childcare vouchers, which are classed as a benefit. Most employers stop providing the childcare vouchers when the employee is on Maternity Leave or make a deduction from Statutory Maternity Pay.

The Inland Revenue has made it quite clear that the vouchers should continue to be paid throughout the period of Maternity Leave. So, if you provide your pregnant employee with childcare vouchers, be aware that if the due date is on or after 5 October 2008 and you provide childcare vouchers, they should not be stopped when your employee begins her Maternity Leave. As the employer, you will have to absorb this cost.

Additionally, you will not be permitted to make deductions from Statutory Maternity Pay, in an attempt to offset the costs of the childcare vouchers.

This may make you think about whether to offer childcare vouchers as a benefit in the future.

However, if you have any questions on the effect of this legislation, please do not hesitate to call our 24 Hour Advice Line on 0845 073 0240.