With women entitled to take up to 12 months’ maternity leave, it is important that the extent of legal entitlements during this time is properly understood by both employers and individuals – any mistakes or misunderstandings could result in women being significantly out of pocket and the employer potentially liable for claims of maternity discrimination and/or equal pay.
The starting position
All women, regardless of length of service or hours worked are entitled to 12 months’ statutory maternity leave. During the time a woman is on maternity leave, her contract of employment continues in every respect, apart from any terms relating to wages or salary. Instead she may be entitled to statutory maternity pay (SMP), although there are eligibility requirements. Those who qualify are entitled to SMP for 39 weeks – the first six weeks at 90 per cent of average salary with the remaining 33 weeks at the prevailing flat rate (from 1 April 2018, £145.18 per week).
Continuation of the contract
Other than in respect of pay, employers’ obligations under the employment contract continue during maternity leave – including benefits. The only exception to this rule are benefits provided solely for business use, such as a car, mobile phone or laptop. However, it pays to check exactly how such benefits are framed in the contract, as if personal use is permitted then these benefits should not be removed.
Examples of benefits that an employee may enjoy and must be continued include gym memberships, memberships of share schemes, life insurance schemes, private medical insurance, and reimbursement of professional subscriptions and training costs.
Importantly, women who have been on maternity leave must be treated in all respects when they return as if they had not been absent – they are entitled to any pay rises given while they were away. This also means that time spent on maternity leave must not be excluded for the purposes of calculating seniority, for example, in relation to redundancy payments and length of service for benefits linked to service.
Women continue to accrue their contractual holidays even though they cannot ‘mix’ periods of leave and take annual leave while on maternity leave. If a woman takes 12 months’ maternity leave then she could return to work with a full year’s holiday entitlement to take. Where a woman has not taken her holiday for the leave year before she started maternity leave then she must be allowed to carry that over to a subsequent year.
Employers must continue to pay their pension contributions in respect of a woman on maternity leave based on her usual pay. However, this is only strictly in respect of any period of paid maternity leave. Women on maternity leave need only contribute based on the pay they are actually receiving, i.e., SMP or contractual maternity pay. The rules of every pension scheme are different, so the position will depend on what they say, but generally, women should be able to top up their contributions if they wish or take a payment holiday.
The treatment of bonuses for those on maternity leave is a highly complex legal issue so advice should be taken. Employers pay bonuses for a wide variety of reasons such as rewarding company or personal performance, encouraging loyalty and incentivising future work. Terms relating to these may be very detailed or very scant. For example, a rule that requires employees to be in active service at the time the bonus is payable will be relevant to any analysis. Therefore the legal position in respect of bonuses is highly fact specific.
Women must receive a bonus that relates to any period before they started maternity leave (regardless of when it is actually paid), the two-week compulsory leave period and, of course, the period after they return to work.
A bonus that is considered part of salary will not be payable as this term does not apply during maternity leave. If a bonus is not considered part of normal salary then it will continue to be payable as a benefit but an employer can provide such a bonus pro rata to reflect the time a woman has been absent.
Case law suggests that a truly discretionary bonus, which is not governed by the terms of the employment contract, for example, a Christmas gift, is payable to a woman on maternity leave. It is increasingly rare to encounter truly discretionary bonuses. It is more usually the amount of any contractual bonus, which may still be reserved to the employer’s discretion. Where this process is not transparent, employers are vulnerable to disputes with those on maternity leave.
Ben Power is senior partner at employment law firm Springhouse Solicitors