The laws governing maternity leave and benefits have come under the spotlight after the adoption of new regulations. As this area of the law continues to evolve, it is important for employers to keep pace.
Benefits entitlement during maternity leave is set to change for women with babies due on or after 5 October. The focus of these changes is on non-cash benefits, such as gym membership, mobile phones or company cars. At present, women are entitled to receive these benefits for the first six months of maternity leave. Under the new regulations, they will be entitled to the benefits for a further six months. The UK is required to comply with EU law and these changes are a direct result of this requirement.
The changes affecting non-cash benefits do not require employers to do anything differently on pensions. However, the legal obligations in respect of pensions are not clear and have been unclear for some time. The confusion stems from conflicting positions under UK social security and employment legislation. There is also some doubt over whether the UK fully complies with EU law on this issue.
However, given the lack of clarity in the existing laws, employers have generally opted to either treat all maternity absence as pensionable, or treat only paid maternity leave as such. Most employers have tended to adopt the second option. But there is a strong argument for employers treating unpaid ordinary maternity leave as pensionable. This view is supported by HM Revenue and Customs but not, as we understand it, by the Department for Business Enterprise and Regulatory Reform. Employers therefore need to weigh up the cost of providing pension contributions throughout maternity leave against the worst case scenario: that legal clarity will emerge at some point, possibly requiring retrospective changes to UK legislation, which could give rise to equality claims. Whatever approach employers adopt, it should be clearly set out in their scheme rules and contracts of employment.
Further legislation and court cases may clarify the uncertainty and divergent opinion on this topic. Until then, employers will no doubt continue to adopt pragmatic approaches to pensions accrual during maternity leave.