Many small businesses now want to offer enhanced pay arrangements for family leave as part of a culture of looking after and valuing their staff. But before you put in place arrangements for enhanced pay, there are some things to think about.

How much can you afford to offer?

Businesses sometimes find themselves considering this question because a key member of staff is going on maternity leave. But you need to take a long term view – the package you decide to offer needs to be affordable for your business. Do some proper projections, based on assumptions about how many employees you expect to go on maternity or other family leave, what the costs are around that, and decide what your business can reasonably afford to commit to in the longer term.

It’s a balancing act, and you want to get it right at the start rather than having to try and untangle and withdraw an arrangement you’ve started but can no longer afford. That can lead to contractual problems, resentment and unfairness as some staff have had more than others.

Keeping it fair

Don’t be tempted to negotiate family leave pay on an individual basis. You may feel you value certain staff more than others, and want to offer them a better package, but these things rarely stay secret and the resentment you could cause isn’t worth it. Plus there is a risk of someone claiming it is discriminatory if the same package isn’t offered to all staff on a clear and transparent basis.

Just maternity leave or other family leave as well?

There has been some case law recently about whether businesses who offer enhanced maternity pay should also offer enhanced shared parental pay as well, to avoid discriminating against men. The jury’s still out on that one, but as a matter of good practice, we encourage our clients to consider offering the same package for all their family leaves.

Will you put any conditions on it?

Many employers who offer more than the statutory minimum pay requirements for family leave put conditions on it. Frequently there is a requirement to return to work or have to pay all or some of the enhanced pay back. Whatever conditions you decide upon, it is absolutely essential to be completely clear about them upfront.

If you require an employee to come back to work in order to avoid paying back the enhanced pay, how long is this for? And what counts as ‘back to work’ for these purposes? What about if the employee is off sick, or takes some annual leave before actually returning to the office?

If they don’t return to work, will you require it all paid back at once, or will instalments do? If they don’t return to work through no fault of their own (redundancy, ill-health or similar) what will happen then?

Will it be inclusive of statutory pay entitlements?

Some employers state that their enhanced pay arrangements are inclusive of statutory maternity pay, some pay statutory pay on top, and some do a mixture. Again it’s about being clear exactly what the arrangement is, so that employees know what they will be getting and when.

Will there be any service requirements?

If you require length of service, by exactly when does the service need to be accrued? If it’s maternity leave, is it the due date, the date the woman starts her leave or another date?

How will pay be calculated?

Most employers express their enhanced family leave pay as a number of weeks at full pay, or a percentage of full pay. But what do you mean by full pay? Is it their annual salary, and if so, at what date? Will you count overtime or bonuses? How will you calculate it for staff who work variable hours, or whose pay fluctuates?

What about women who want to reduce hours temporarily in late pregnancy in order to enable them to continue to work, will this affect their maternity pay? What about those who are off sick?

 

The key for all of these factors is considering them carefully and in detail, thinking of the various scenarios which may occur, and making sure you are clear in any documentation, policies, contracts and letters, about conditions, requirements and calculations, so that employees are confident they are being treated fairly, understand how the arrangement works and can plan accordingly.

 

If you would like more advice on enhanced family leave pay do get in touch.