Consultation on radical reform of parental leave and flexible working

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The Government publishes its “wide-ranging changes” to family leave entitlements and flexible working rights.

In September 2010, the Department for Business, Innovation and Skills (BIS) announced the Government’s plans to develop flexible, family-friendly workplaces.  The detail of these plans has now been published for consultation in a series of documents with the general title “Consultation on Modern Workplaces”.

In recent years, the statutory changes to family-related entitlements have focussed on additional paternity leave and pay and on extending flexible working to carers of adults.  The September 2010 announcement referred to:

• the extension of flexible working to parents of children aged 17 from April 2011 (which was inexplicably cancelled at the last moment), and
• proposals to extend flexible working to all employees and introduce a new system of flexible parental leave.

These proposals for further change were described at the time as “much more ambitious” and “a long process involving wide-ranging change”.

The new consultation involves proposals in four areas, namely:

• flexible parental leave
• flexible working
• annual leave entitlements
• equal pay audits.

The current intention is to introduce the major changes from April 2015, although some may be legislated earlier.

The consultation period runs until 8 August 2011 and response forms can be sent to the addresses provided in the document or completed online.

The following notes are a summary of the Government’s proposals and how they compare with the current statutory provisions.  Readers interested in submitting their own comments on the proposals to the Government should consider the full consultation document.

Flexible parental leave

The term “parental leave”, as currently used in employment legislation, refers to a period of up to four weeks’ unpaid leave in a year that may be taken by both natural and adoptive parents, but limited to

• 13 weeks in the period up to a child’s fifth birthday, or,
• in the case of a disabled child, 18 weeks in the period up to the child’s 18th birthday.

The UK is required under revisions to the European Parental Leave Directive to increase the minimum period of parental leave from three months to four months.  The Government has confirmed its intention to comply with this change by increasing the statutory entitlement to 18 weeks for all children.

The current paid leave provisions have specific names, namely

• statutory  maternity pay (SMP), for up to 39 weeks, and maternity leave, for up to 52 weeks
• statutory adoption pay (SAP), for up to 39 weeks, and adoption leave, for up to 52 weeks
• ordinary statutory paternity pay (OSPP) and leave, for up to 2 weeks
• additional statutory paternity pay (ASPP) and leave, where a period of entitlement to maternity and adoption leave and pay is given up by the other parent.

However, the term “parental leave” has a much broader meaning in the new proposals.  There will be just three kinds of leave – maternity leave, (ordinary) paternity leave and parental leave.  Maternity leave and pay will be available for up to 18 weeks.  Paternity leave will continue to be available to fathers at the time of a child’s birth.  Parental leave and pay will be available to mothers, fathers and adoptive parents on an equal basis.  The objective is to move from a system based on the assumption that the mother must be the primary carer in the early stages of a child’s life to a system that provides parents with the flexibility to choose how best to balance their employment and caring responsibilities.  Greater flexibility in the rules surrounding parental leave would also allow employers to develop contractual schemes that would not prevent them from recovering much of the costs incurred from the State.

The consultation document does not use any consistent terms to distinguish between the different kinds of parental leave that will exist in the new arrangement.  In order to explain the changes more clearly, the following notes use the terms

• “paid flexible parental leave” for the paid period of parental leave available during the first year of a child’s life
• “unpaid flexible parental leave” for the unpaid period of parental leave available during the first year of a child’s life
• “reserved parental leave” for that period of flexible parental leave that may only be taken by the mother or by the father
• “unpaid parental leave” for the period of parental leave available after the first year and up to the child’s fifth birthday.

These are not necessarily the terms that will used in future government documents or in the legislation.

The proposals, therefore, are:

1. In addition to the existing ante-natal care appointment rights, fathers will be given statutory entitlement to attend two appointments, either by providing specific entitlement to unpaid time off, or by allowing parental leave to be used for that purpose (in which case the leave would be paid).
2. Maternity leave and pay will be available for up to 18 weeks.  The European Pregnant Workers Directive requires at least 14 weeks but the European Commission has already proposed increasing that to 18 weeks.
3. There are no plans to change the qualifying week for SMP or the optional dates from which a mother may start her maternity leave.
4. The two weeks of ordinary paternity leave and pay will be retained without change.
5. The remaining 34 weeks of maternity leave, as currently provided, will become flexible parental leave.  The remaining 21 weeks of maternity pay/maternity allowance will become flexible parental pay/parental allowance.  Flexible parental leave and pay will be available to mothers and fathers on an equal basis.  It will apply to all working fathers, including those who are self-employed or who change jobs during the pregnancy.  Flexible parental pay will not be payable beyond the child’s first birthday.
6. To encourage fathers to use their entitlement to flexible parental leave, four weeks of paid reserved parental leave will be provided for the exclusive use of each parent out of the 34 weeks of parental leave.  If the mother wishes to take the full 52 weeks of maternity leave, the father’s four weeks of reserved parental leave will be in addition to the 52 weeks.
7. Opportunities for even greater parental leave flexibility that are opened up for consultation are:
   • allowing parents to decide how much of the flexible parental leave and pay each will take
   • allowing parents and their employers to agree to flexible parental leave being taken a few days or weeks at a time or on a part-time basis (e.g. father taking more leave at the birth of the child; mother returning to work part-time for a year)
   • allowing the parents to take their flexible parental leave concurrently.
8. The consultation document asks whether unpaid parental leave, currently available up a child’s fifth birthday,  should be made available for a longer period, up to the child’s 8th, 12th, 16th or 18th birthday.  Arguments can be made for any of the four different options.

Based on the proposals made in the consultation document, the entitlements for mothers and fathers would be as follows:

The proposals described above apply specifically to maternity situations.  The consultation document does not explain how these changes will read across to adoptions.  It is likely that, as there is no European Directive for adoption leave, the full 52 weeks of adoption leave and 39 weeks of adoption pay will be changed to 52 weeks of shared parental leave and 39 weeks of shared adoption pay.

Examples from the consultation document

The following examples assume that maternity leave starts from the birth of the child.  In practice maternity leave and pay can start up to 11 weeks before the expected week of childbirth.

1. Mother takes primary caring responsibility for the first year

2. Father takes primary caring responsibility for the first year

 

3. Mother and father share parenting

 

Flexible working

The term “flexible working” is used generally to describe a wide range of working practices and arrangments that enable employees to balance their employment obligations and their other responsibilities.

As an employment right, however, it is a shorthand way of describing

• the statutory right of employees to request a contract variation,
• the statutory obligation of employers to consider the request seriously, and
• the statutory procedures for considering requests.

The flexible working rights currently apply to:

• parents of children who are under age 17
• parents of disabled children who are under age 18
• carers of adults.

The Government’s intention is to extend the right to request flexible working to all employees.  Consideration has been given to a non-regulatory approach to stimulating flexible working but the Government’s view is that, in view of the success to date of the arrangements (it is estimated that between 80% and 90% of requests are accepted by employers), the best approach is to extend the existing statutory right.

There are no plans to alter the current eight business reasons for an employer to turn down a request.

Related issues discussed in the consultation document include:

• replacing the existing defined procedures for considering requests with a new duty on employers simply to consider requests “reasonably”, supported by a new Code of Practice
• to cope with an increased number of applications for flexible working, allowing employers to prioritise competing requests on the basis of factors that they consider to be most relevant, while respecting discrimination law
• retaining the current 26-week qualifying period for making requests
• allowing temporary contract changes to be considered by employers so that short-term problems faced by employees can be handled
• initially exempting employers with fewer than 10 employees and new start-up businesses from the extension of the right to all employees.

No target date for the extension of flexible working is quoted in the consultation document but it appears that a date earlier than 2015 is being considered.

Annual leave entitlements

The Working Time Regulations 1998 (WTR) implement the European Working Time Directive, including the right of workers to a minimum of 4 weeks’ annual leave (referred to as the “EU leave entitlement” below).  UK domestic Regulations have increased that entitlement by an additional 1.6 weeks (referred to as the “UK leave entitlement” below).

A number of decisions of the Court of Justice of the European Union (CJEU) have ruled on various conflicts that arise between the right to paid annual leave and other types of leave.  The decisions in Stringer and Pereda concern the interaction of sickness absence and annual leave; Gomez covered maternity leave; and Land Tirol considered parental leave.

The principles established in respect of sickness and the annual leave entitlement under the Working Time Directive are:

1. workers continue to accrue annual leave entitlement during sickness absence (Stringer)
2. workers can choose to take annual leave at the same time as being absent due to sickness (Stringer)
3. workers whose employment terminates in a year during which they have been away from work due to sickness are entitled to the same termination payment for untaken annual leave as any other worker (Stringer)
4. workers who fall sick during scheduled annual leave can reschedule the annual leave within the same leave year (Pereda)
5. workers who were unable to take annual leave due to sickness absence and who have not had the opportunity to take it again within the same leave year must be able to carry it forward into the next leave year (Pereda).

The Gomez and Land Tirol judgments mean that workers cannot lose their right to annual leave because of maternity and parental leave.

The WTR are consistent with the first four of the five points above.  However, they currently prohibit carrying forward the 4 weeks’ “EU leave entitlement” to another leave year.  The additional 1.6 weeks’ “UK leave entitlement” can only be carried forward if this is provided for contractually.  The Government is obliged to bring the WTR into line with the CJEU rulings but intends to limit the changes to the rules relating to the 4 weeks’ EU leave entitlement set by the Working Time Directive.

The statutory changes to the WTR proposed by the Government are as follows.

Sickness absence – carrying forward and rescheduling annual leave

1. Where workers have been unable to take their annual leave due to sickness absence and it is not possible to schedule the leave in the current leave year, they will be able to carry forward annual leave into the following leave year.
2. Where workers fall sick during scheduled annual leave, they will be able to reschedule the annual leave for a later date, including carrying it forward if it is not possible to reschedule in the current leave year.

In such situations, the employer should nevertheless be able to insist that the unused leave be taken in the current leave year if there is still opportunity to do so.  Conversely, employers should be able to require that unused leave due to sickness be carried forward to the following leave year if there are good business reasons for doing so.

Examples of situations where leave could be carried forward

A worker plans to use a fortnight of his leave entitlement by taking a holiday near the end of the leave year.  He falls ill and is off work for the whole of the last two months of that year.  In such circumstances, the employee would be able to carry forward the untaken fortnight’s leave to the next leave year.

A worker in a retail business – where the leave year runs from January to December – is off sick for all of September, October and November, leaving the worker with a week of unused leave entitlement.  On returning to work in December the employer is concerned at the prospect of the employee taking the outstanding week’s leave during the company’s busiest trading period, since little cover will be available.  The employer therefore requires the remaining week’s leave to be carried forward to the next leave year.

Sickness absence – limiting how much leave can be carried forward

1. Employers will be able to limit the entitlement carried forward to that required by the EU leave entitlement but will not be obliged to allow the UK leave entitlement to be carried forward.  For example, if a worker has only taken three weeks and is prevented from taking the remaining 2.6 weeks by sickness, the employer will only be obliged to allow one week (i.e. the remainder of the EU leave entitlement) to be carried forward.
2. A worker’s entitlement to payment in lieu of untaken leave on termination of employment will include payment in respect of any untaken leave carried forward from the previous leave year.  Payment will not be required of any UK leave entitlement that was not carried forward from the previous leave year.

Example of payment on termination

Due to sickness, a worker carries forward 10 days of annual leave to the following leave year.  When the worker leaves the employment half- way through the year, the employer must pay for any untaken leave entitlement due on termination.  The employer calculates how much of the current year’s entitlement is untaken and pays the worker for that and for any of the 10 days that have not yet been taken.

Sickness absence – rescheduling annual leave within the leave year

Where a worker has been sick during scheduled annual leave, the employer will only be obliged to reschedule any part of the annual leave that is EU leave entitlement.   There will be no requirement to reschedule any UK leave entitlement.

To draw this distinction, the employer and worker will have to know whether some or all of the scheduled leave was EU leave entitlement.  This could be achieved by defining a rule in a contractual, workplace or collective agreement, such as to provide that bank holidays, whenever they occur, are part of the worker’s UK leave entitlement and may not be rescheduled if the worker is ill on one of those days.

However, in the absence of any local agreement, the earliest leave taken in a holiday year would be treated as EU leave entitlement and, when the full 4 weeks’ leave have been taken, the remaining period of leave would be UK leave entitlement and any additional occupational entitlement.  One of the effects of this approach would be that, if a worker is ill on any bank holidays falling within the first 4 weeks of annual leave, it would have to be rescheduled.

Example of rescheduling leave

A business only allows the rescheduling and carry-forward of EU leave entitlement and allocates this to the first four weeks of leave taken by a worker. A particular worker has already taken three weeks of leave in the current year and plans to take another break of 2.6 weeks, thereby using up his full statutory leave entitlement.  He is ill for the whole of this period of scheduled leave and notifies the employer accordingly.

On returning to work, the worker is only entitled to reschedule the first week (i.e. the rest of the EU leave entitlement) and loses the remaining 1.6 weeks of UK leave entitlement.  If the timing of the illness is such that there is no opportunity for him to retake his leave before the end of the leave year, he could carry the week forward to the following leave year.

Sickness absence – accrual of leave

The CJEU decisions are clear that entitlement to statutory annual leave must continue to accrue during sickness absence, and the WTR is not inconsistent with that requirement.  However, the Government has considered whether the same distinction should be made in the WTR in relation to accrual between EU leave entitlement and UK leave entitlement.

The effect would be, for example, that where a worker is off sick for a whole year and chooses to take annual leave during the absence, the employer would only have to pay for 4 weeks, not for 5.6 weeks.

However, the Government’s view is that the cost savings would be outweighed by additional complexities and administrative costs.  Every time that a worker is absent sick, even for a single day, it would be necessary to calculate that proportion of the UK leave entitlement that is not accrued as a result.  It would also not be possible to determine how much leave a worker is entitled to until the end of the leave year, by which time the worker may have taken too much leave.

Family leave – carrying forward annual leave

The WTR will be amended to allow untaken leave due to absence on maternity, adoption, parental, ordinary paternity and additional paternity leave, and, in future, the new flexible parental leave, to be carried forward to the next leave year.  As is the case of sickness, employers will also be able to insist that leave is carried forward where there are conflicting business interests.

However, unlike the sickness situation, the Government’s understanding of the CJEU rulings is that the carry forward provisions should apply to both the 4 weeks’ EU leave entitlement and the 1.6 weeks’ UK leave entitlement.

Ideas for further annual leave flexibility

Two ideas are suggested in the consultation document for further consideration:

1. Allowing employers to buy out the 1.6 weeks’ UK leave entitlement, if a contractual, workplace or collective agreement is reached.  This could not be done with the 4 weeks’ EU leave entitlement as it is not permitted by the European Working Time Directive.
2. Allowing part or all of any untaken UK leave entitlement to be carried forward in cases of overriding business need, not just where leave is untaken due to sickness or family leave.

These are not currently proposals and comments are sought, in particular on the risk of employees being deprived of annual leave in the leave year without real justification.

Equal pay audits

In order to reduce further the pay gap between men and women, the Government will extend the powers of employment tribunals so that, where an employer has been found guilty of pay discrimination, a requirement for the employer to carry out a pay audit and publish the results may be ordered.

The legislation will provide that such an order may not be made where

• an audit has already been conducted in the last three years,
• the employer has other means in place, appropriate in the circumstances, of ensuring that the pay structure is non-discriminatory, e.g. where pay structures are clearly transparent, or
• the tribunal does not consider it would be productive to order an audit in the particular circumstances.

Questions are raised in the consultation document on the content of a pay audit and the type of sanctions that should apply for non-compliance.

Further information:

Parental leave and flexible working: changes proposed

Consultation on Modern Workplaces (all documents, including response forms)

Consultation on Modern Workplaces (full consultation document)

Tags: annual leave, equal pay, family leave, flexible parental leave, flexible working, modern workplaces, Parental leave, payment termination, Recent Payroll News, sickness absence system

This entry was posted on Thursday, May 19th, 2011 at 15:03 and is filed under Family Leave. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.