A law in its infancy

A law in its infancy

A number of employment law changes that will impact on UK businesses came into force in 2015. Fergal Dowling, partner at the Birmingham office of law firm Irwin Mitchell, highlights one of the most significant ones – shared parental leave.

One of the most high profile changes recently has been the introduction of shared parental leave. From April, new parents and adopters have an opportunity to share up to 52 weeks’ leave between them and up to 37 weeks’ pay, in a way which best suits their families, via a new right called shared parental leave (ShPL) and shared parental pay (ShPP).

Eligible parents will be able to take time off together to care for their child, transfer leave to their partner, and return to work in between leave periods during the child’s first year. The scheme potentially offers parents a huge amount of flexibility, but to achieve this, the rules are highly complex. 

Parents do not have to take ShPL – it is entirely optional and those who do not ‘opt in’ will still benefit from existing family friendly rights such as maternity, adoption and paternity leave.

Employees do not have to make a decision about whether they wish to take ShPL before their baby is born or their adoption takes effect. Instead, they can start maternity or adoption leave and then decide to convert any remaining leave to ShPL at a later date.   

ShPL is only available to eligible parents whose babies were due on or after 5 April 2015, or to adoptive parents who have a child placed with them on or after this date. Only employees can apply for ShPL and it is not available to agency workers or to those who are self-employed.

To qualify, employees must have been continuously employed for at least 26 weeks before the 15th week before the baby is due and must remain so. The co-parent must also be ‘economically active’, which means that they must have worked (although not necessarily as an employee – agency staff may also qualify), and earned a minimum amount over a qualifying period.

So, if the employee is the sole bread winner, he/she will not be eligible for ShPL. Employees may also be eligible to receive Shared Parental Pay (ShPP) for up to 37 weeks provided there is some remaining statutory maternity or adoption pay that would otherwise be available which can, subject to certain rules, be transferred to the other parent or utilised by the primary carer. ShPP is paid at a flat rate (currently £138.18 per week).

There has been much discussion and speculation in terms of how popular ShPL will be. Each year 285,000 working couples are expected to be eligible. However, the Government predicts that just 5,700 couples will take advantage in the first year.

At Irwin Mitchell, we think demand might be higher. Indeed our survey revealed that a third of men thought ShPL would be the most sensible option for their family as their wife or girlfriend earns more than them. Nine out of 10 couples where the woman is the main breadwinner said that they worry how they would cope financially if the mother were to take their full maternity leave. Sixty-one per cent of men claim they would be happy to become a stay-at-home dad, even if it had a detrimental effect on their career in the future.

Notification requirements
So how should an employee approach their employer about this? Well, an eligible mother who wants to take ShPL, or enable her eligible partner to take it, must first end her maternity or adoption leave.  

She can do this by returning to work before the end of her maternity leave period, or by giving notice that she intends to end it at a future date.

Employees must give their employers at least eight weeks’ written notice of the date they wish to take leave and this must be signed by the eligible co-parent.  

Employees who ask to take a single block of leave are entitled to take it. However, if an employee asks in a single notice to take leave in different blocks, her employer does not have to agree to it.

Instead, it has two weeks to discuss the pattern of leave and suggest alternatives. If the request is refused, the employee has the right to take the amount of leave as a continuous period.

Whilst employers can reject requests for discontinuous leave without giving a reason, we believe that it would be unwise to do so as employees have the right to withdraw and resubmit their request, and there is no limit on how many times they do so.

More importantly, employers that reject requests for discontinuous leave face the prospect of grievances and allegations of discrimination, particularly from male employees who may argue that female employees are more likely to have requests for discontinuous leave approved.

Employers need to be ready to assess requests for discontinuous leave consistently, irrespective of gender and by reference to fair and well-documented business reasons.

Top Tips
To assist businesses with ShPL, Irwin Mitchell has produced the following top tips to help businesses deal effectively with the legislation;

  • Do not underestimate the popularity of Shared Parental Leave – according to our recent survey, more than a third of men say that being a stay at home dad would be the best financial option for their family.
  • Don’t leave it to the last minute – employers should put in place appropriate policies and procedures as soon as possible.
  • Consider requests for discontinuous leave by reference to fair well-documented business reasons.
  • Conduct an impact assessment of the new rules after six and 12 months. This assessment will help identify uptake and can form the basis of any decision taken on whether to offer enhanced shared parental pay or not.
  • Make sure that requests are dealt with in a sensitive (and non-discriminatory) manner.

Holiday pay
The other key issue concerns holiday pay and in particular, how much workers are entitled to be paid when taking annual leave if the individual earns overtime or commission.

Last year, the Employment Appeal Tribunal found that workers who regularly worked contractual overtime and received taxable allowances linked to their work were entitled to have these payments included in their holiday pay and that it is unlawful for employers to only pay holiday at a basic rate.  

In addition, the European Court of Justice (ECJ) found that a worker whose salary included regular large commission payments should be compensated when taking holiday because he was not able to earn commission.  

This high profile Lock v British Gas case was also heard at an Employment Tribunal on 4 February 2015 after the ECJ ruling last year.

In the case of Mr Lock, the ECJ ruled he was disadvantaged by the fact he couldn’t earn commission whilst on holiday and therefore this had an impact on his earnings in the following month. 

In a judgment handed down in March, the Employment Tribunal has now determined that the UK’s Working Time Regulations can be interpreted in line with the European ruling.

Now that it has cleared that ‘hurdle’, we believe it could change the way that companies pay some commission in the future and believe it could potentially open the floodgates for back pay from employees who have similar commission arrangements and believe they have been disadvantaged.

These decisions are significant and suggest that many employers and agencies have been underpaying holiday for the last 16 years.  

Although they are subject to certain limitations, businesses should certainly review the holiday pay calculations of their employees and agency staff they are responsible to pay, to ensure that they comply with these rulings and include all necessary payments.