Why Every Employer Should Offer Paid Maternity and Paternity Leave

Although Statutory Pay for new parents has been part and parcel of Employment Law for many years now, employers are increasingly offering extra paid maternity and paternity leave on top of statutory payments.

Many other countries have been offering significant financial help to new and expectant parents for some time, but companies in the UK are now really starting to catch on.

What are the benefits for employers?

Fosters Loyalty

Paid maternity or paternity leave signals a flexible attitude to the challenges of life outside of work, and has shown to boost a parent’s feeling of goodwill towards their employer, particularly if pay is enhanced during parental leave time. This in turn fosters loyalty to the company and helps retain working parents, and those who are hoping to return after maternity leave.

Boosts Staff Retention

Paid maternity and paternity leave also makes organisations more appealing to an increasingly diverse workforce, making it easier to retain good staff as well as hold on to staff you’ve spent time and money on training up.

It can cost up to 400 percent of a talented employee’s annual salary to replace them, but paid parental leave can help instil loyalty and boost retention.

Paid maternity or paternity leave is an investment in your employees and their future. This investment helps to increase the chances that talented, experienced and productive individuals remain with your business after having a child. 

Talent Attraction

As more companies offer enhanced payment for leave, those who don’t become increasingly unattractive to prospective employees. By offering enhanced parental leave, companies are able to attract prospective employees who want to build a career over many years with a company that will support them as their family life evolves. 

When IBM increased its paid parental leave policy their Chief Diversity Officer said. “The ROI comes in the form of attracting the best talent in the industry, and in having an engaged workforce,” Lindsay-Rae McIntyre, IBM’s Chief Diversity Officer.

Another example is Axa, whom we’ve recognised for having a fantastic parental leave policy Axa’s human resources chief Rino Piazzolla says the deal will be a “competitive advantage in attracting and retaining the best talent”.

Staff Morale

Studies have shown that companies whose employees have access to paid leave, allowing employees to potentially spend more time with their new addition, have seen a positive impact on morale. Positive and engaged staff are important key performance indicators for any business. 

Helps Reduce The Gender Pay Gap Caused By The Motherhood Penalty 

Parents that have paid parental leave are more likely to return to the workplace. Women in partiular have a high drop off rate approximately 8-10 years into their career right around the time when they have children. Enhanced leave and supportive benefits can significantly hwlp retain and increas the the number of women that remain in the workplace. 

Women who receive little payment for their leave are automatically put at a disadvantage when it comes to the gender pay gap. Not to mention that whilst on leave many are not eligible for promotions or pay rises, and many miss out on pension payments.


Improves The Mental Health of Mothers

The Norwegian school of economics found that introduction of paid maternity leave has important medium and long-term health benefits. Mothers who are physically and mentally healthier may be better able to invest in their children, leading to better outcomes. 

Happy parents means a happy and productive workforce. A study found that happy employees are up to 20% more productive that unhappy employees.


Takes The Pressure Off Dads

Dads feel this overwhelming pressure to provide physically and emotionally for their family and this can be an incredible and unsustainable burden. This heavy burden can be heightened by poor paternity pay with barley enough time to bond and care for your new child and partner. Paid leave can help alleviate this pressure and helps contribute to the morale of Fathers positively affecting productivity. 



Scandinavia Leads the Way

In Norway, paid parental leave was introduced back in 1993. New mums can have a 14-week allowance, and for the 18 weeks afterwards they can take parental leave on full salary, or 28 weeks on 80% salary. This can be divided as the parents see fit, with the belief being that it allows more flexibility for dads to stay at home longer if they wish, and for mums to go back to work.

In Sweden, parents can have 480 days leave which includes 390 at around 80% of their salary. This is for each baby born, with 60 days allocated to each parent. The remaining 360 days can again be divided as the couple choose.

Certain UK companies are now leading the way in their forward-thinking approached to more paid parental leave. For example, large online retailer Etsy now gives six months’ leave on full pay for both mothers and fathers instead of the 12 weeks they used to give. Then there’s Manchester-based technology firm UKFast which offers a generous maternity leave of 16 weeks on full pay, and even an onsite crèche.

Check out our article on the best companies for parents and mums-to-be. 

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How does the UK Government subsidise maternity pay for employers?

Employers can generally reclaim 92% of employees’ Statutory Maternity Pay (SMP), Shared Parental Pay, Paternity, and Adoption pay from the government.

If a business is eligible for Small Employers’ Relief, it can reclaim 103%. However, all businesses must have paid in a maximum of £45,000 in Class 1 National Insurance (with any reductions such as Employment Allowance) in the last complete tax year before:

  • the 15th week before the week of the due date
  • the week an employee was informed of a match with a child by the adoption agency
  • the date on the official notification if an employee is adopting a child from abroad

Other things that businesses can do if they cannot afford to offer contractual parental leave

Businesses can also apply to be paid by HM Revenue and Customs (HMRC) in advance if they’re financially struggling to make Statutory Maternity, Paternity, Adoption and Shared Parental payments. An application can be made up to 4 weeks before the first payment is needed and no earlier; it is subsequently then paid back. Take a look at the HMRC website for further information.

Parents greatly value work flexibility, which in turn can increase their productivity. While you may not be able to offer a large amount of paid leave, you can offer flexibility in terms of working remotely, job sharing or part-time working. Other benefits that could be offered include a salary sacrifice scheme for childcare, pension contributions, private healthcare, or company car allowance.