What happens to employee benefits during parental leave?

Parents in the UK are entitled to various types of parental leave. In this guide, we'll focus on maternity leave, paternity leave and shared parental leave. However, your employees can also take adoption leave when they adopt a child, parental bereavement leave and neonatal care leave depending on the circumstances. Employees can also claim up to 18 weeks of unpaid parental leave per child up to their 18th birthday, which is usually capped at 4 weeks per year unless you agree otherwise. Pregnant employees can also take reasonable paid time off for antenatal appointments and shouldn't be asked to make up any hours they missed.

Let's look at the main types of parental leave that employees can take when expecting a new baby.

Statutory maternity leave (SML)

Mothers can claim up to 52 weeks of maternity leave. The full statutory maternity leave period comprises two sections. Ordinary maternity leave runs for the first 26 weeks of maternity leave, followed by additional maternity leave for another 26 weeks. New mums must take a minimum of two weeks of maternity leave following the birth, or four weeks if they work in a factory. Otherwise, they can decide how much maternity leave they want to take.

Statutory maternity leave can start up to 11 weeks before the birth, with your employee choosing their start date. There are some exceptions. If the baby arrives early, before an employee has started their maternity leave, the leave period will start the day after the birth. It also starts automatically if the employee takes sick leave for a pregnancy-related reason in the four weeks before the due date.

Employees can choose when to return to work. If they've notified you of their intended return date but then want to change it, there's an 8-week notice period.

Eligibility for statutory maternity leave

Your staff must meet the definition of an employee, rather than a worker, to qualify for statutory maternity leave. They can take maternity leave as long as they qualify as an employee and have told you about the pregnancy within the notice period, regardless of how long they've worked for you. The notice period is a minimum of 15 weeks before their expected due date.

They can't take statutory maternity leave if they're adopting a child or having a baby with a surrogate, but they may be entitled to adoption leave.

Eligibility for statutory maternity pay has a few more conditions, which we'll discuss shortly.

Statutory paternity leave (SPL)

Statutory paternity leave can only start after the birth of a child, and provides up to two weeks of leave that your employee can take at any point up to 52 weeks after the birth. Employees must tell you the baby's expected due date at least 15 weeks in advance and when they want their leave period to start. It doesn't have to be an exact date. For example, they may tell you that they want to start their leave as soon as the baby is born, or that they intend to wait until later as they have other family support in place straight after the birth. They can also take the two weeks separately or in one block. If their plans change and they want to alter the start date, they must give you at least 28 days' notice.

Employees can also be entitled to paternity leave if their baby is stillborn after 24 weeks of pregnancy, or if they're born alive but subsequently pass away at any point. They may also be able to take parental bereavement leave.

We've mentioned that mothers are entitled to reasonable paid leave for antenatal appointments. The rules for fathers are slightly different. An employee can take unpaid leave if they're the baby's father, or if the expectant mother is their spouse, civil partner, or if they're in a long-term relationship. They can take time off for up to two antenatal appointments, each up to 6.5 hours. You can offer more leave if you choose to. This leave is a day one right for employees, while agency workers must have worked for you for at least 12 weeks to qualify.

Eligibility for paternity leave

As with maternity leave, paternity leave is available to employees from the first day of their employment provided they've complied with the notice period. The employee must be the child's father or the mother's partner, spouse or civil partner. They must also take their leave to look after the child, rather than treating it as an opportunity to go on holiday.

Shared parental leave

Shared parental leave (SPL) is available to parents whether they're pregnant, adopting or having a baby with a surrogate. It lets parents share up to 50 weeks of parental leave and up to 37 weeks of pay within the first year after the birth or adoption.

The leave period gives parents flexibility as they can choose to take their leave in one block or split it up over the year. Parents can choose to take their leave at the same time or separately, with overlapping leave when needed. Taking shared parental leave involves reducing the maternity leave period and statutory maternity pay and using the rest as shared leave.

The eligibility rules for SPL are different for birth parents, adoptive parents and those using a surrogate. Birth parents must both have parental responsibility for the child at birth. The eligibility criteria also vary depending on who wants to use the leave and pay.

Adoptive parents and parents using a surrogate must share parental responsibility for the child from their birth, or from the date the child is placed with them. There are also eligibility criteria based on each parent's work status and earnings, which vary depending on how the leave and pay is shared.

The main statutory benefits your employees are entitled to during parental leave are statutory maternity pay (SMP) and paid paternity leave. They can also claim statutory shared parental pay (ShPP) if they take shared leave. While an eligible employee can take statutory maternity leave or paternity leave from the first day of their employment, the eligibility criteria for SMP and paternity pay are a little more complex.

That said, you can choose to offer more generous benefits to eligible employees, or include other employees who may not meet the criteria for statutory maternity pay in your maternity pay scheme. For example, some employers offer full pay during ordinary maternity leave, then a combination of half pay and statutory maternity pay during additional maternity leave.

Let's consider the rules and eligibility criteria for pay during parental leave.

Maternity pay

Statutory maternity pay is available to eligible employees for up to 39 weeks of maternity leave. Mums can take up to 52 weeks of maternity leave, meaning that the last 13 weeks of additional maternity leave are unpaid unless you decide to offer enhanced maternity pay.

Statutory maternity pay gives an employee 90% of their usual average weekly earnings for the first six weeks of statutory maternity leave. For the remaining 33 weeks of maternity leave, they'll either continue to receive 90% of their average weekly earnings, or a fixed rate of £194.32 per week, whichever is lower. You should process payments through payroll in the same way as employees' normal pay, deducting tax and national insurance contributions if necessary. Statutory maternity pay typically starts on the same date as an employee's statutory maternity leave.

If you don't believe they're eligible for statutory maternity pay, you'll need to provide them with form SMP1 within 7 days confirming the reasons for your decision. If they aren't eligible, they may qualify for maternity allowance instead.

Eligibility for statutory maternity pay - notice period and evidence

As we've mentioned, an employee can be entitled to take maternity leave but not receive statutory maternity pay. To receive statutory maternity pay, an employee must comply with the relevant notice period and provide evidence of the pregnancy.

Employees must provide at least 28 days' notice of the date they want their maternity leave and pay to start. You can ask for notice in writing, which is generally a good idea to help you keep accurate HR and financial records. You must also let the employee know how much statutory maternity pay they'll receive within 28 days. If you've decided to offer enhanced maternity pay, this also allows you to confirm their additional entitlement.

Employees can provide evidence of the pregnancy by giving you a letter from their doctor or midwife, or a MATB1 certificate.

Eligibility for statutory maternity pay - work history and pay

An employee's pay must meet a minimum level, and they must also have worked for you for a minimum period to qualify for statutory maternity pay. Their average weekly earnings must be at least £129 per week. They must also have worked for you for at least 26 weeks, including the 'qualifying week', which is the 15th week before their expected due date.

Maternity allowance

As mentioned, employees who aren't eligible for statutory maternity pay could receive maternity allowance instead. It's available to employees who have been employed for at least 66 weeks in the 26 weeks before the expected week of birth. It is also available to self-employed people or anyone doing unpaid work for their spouse or civil partner's company.

It's paid for up to 39 weeks, the same as maternity pay, and can start at any point between 11 weeks before the due date and the day after the birth. Maternity allowance pays the same rate as maternity pay, either £194.32 per week or 90% of an employee's average weekly earnings. Of course, you can also offer enhanced maternity pay if you choose to.

Pay during paternity leave

Statutory paternity pay is paid at the same rate as both statutory maternity pay and maternity allowance. It should be processed via payroll in the same way as an employee's usual earnings. An employee's paternity leave and pay can only start once their baby has been born.

As with maternity leave and pay, eligibility criteria apply. Your employee must tell you about the pregnancy and confirm the baby's due date no later than the 15th week before the baby is due. This is known as the qualifying week, and the employee must have worked for you for at least 26 weeks at that stage to qualify for paternity pay. They must also give you at least 28 days' notice of the date they want their pay and leave to begin, or if they want to change the date they've previously given you.

Finally, an employee must have average weekly earnings of at least £129 to qualify for paternity pay. If an employee isn't eligible, you should notify them within 28 days.

As with maternity leave and pay, you can offer enhanced paternity benefits, either by offering paid paternity leave to staff who don't meet the eligibility criteria, or providing full pay during their paternity leave.

Pay during shared parental leave

Shared parental leave lets parents share up to 37 weeks of statutory shared parental pay (ShPP) between them. An employee who is entitled to 39 weeks of maternity pay can choose to take less and share the remaining leave with her partner.

While maternity pay has two separate pay rates that apply for the first 6 weeks and the following 33 weeks, ShPP has a fixed rate throughout the 37 weeks. It pays either £194.32 per week, or 90% of the parent's average weekly earnings. This means that the rate can change depending on which parent is claiming. The mother can also take maternity leave and claim maternity pay initially, before switching to SPL and ShPP later.

As you can see, statutory rates of pay are the same for all parents, except for the first six weeks of maternity leave. You can choose to offer enhanced pay to all your employees, but it's a good idea to speak to your HR department and financial advisers to consider the impact on your business and make an informed choice.

Employees who are on paternity or maternity leave retain their employment rights while they're away from work. Employees should receive any pay rises awarded during maternity leave and may also be entitled to performance bonuses, depending on how these are calculated and awarded. They should receive company-wide bonuses, while other performance bonuses can be awarded on a pro rata basis if the qualifying period started before they started maternity leave or finished after their return.

Staff also have a right to return to work to the same job if they've taken standard statutory maternity leave or paternity leave. This can change if they've taken extended unpaid leave. Whilst they have the right to return to the same job, this may not be practical if there have been changes to your business during their absence, such as hiring maternity cover. However, you should still offer them a similar role with the same terms and conditions as their original job as a minimum. If changes have led to a redundancy process, they have a right to be consulted and should be offered a suitable alternative job. You should always take professional advice from an expert in discrimination law, as making an employee redundant as they return from maternity leave can expose your business to claims for unlawful sex discrimination or maternity discrimination.

While on leave, employees can work for up to 10 days on full pay. These are known as keeping in touch days. They're optional and should be agreed between you and your employee. However, they can be useful if significant changes are taking place, either in the systems and processes you use or the structure of the company.

Let's look at how maternity leave affects other employee benefits.

Annual leave

Staff taking paternity or maternity leave continue to accrue annual leave during their absence. Employees can only take one type of leave at a time, meaning they can't use their paid holiday entitlement during maternity leave, paternity leave or shared parental leave. This is less likely to be a problem for fathers taking two weeks' paternity leave, as they can easily take the rest of their annual leave later in the year. Under normal rules, employees can only carry 8 days of paid holiday into the following year, but the position changes for maternity leave and other parental leave. If an employee can't take some or all of their holiday entitlement because they're on maternity leave or other family leave, they can carry all of their unused paid holiday entitlement into the following year.

In practice, this means that employees can extend their leave by using all of their unused holiday entitlement before returning to work. This is worth considering when planning maternity cover.

Pension contributions

If an employee is enrolled in the company pension scheme, pension contributions, including employer's contributions, should continue as long as they're on paid leave. These pension contributions should be based on an employee's normal salary, rather than on any reduced salary or maternity pay.

However, pension contributions can pause during a period of unpaid leave, including the last 13 weeks of maternity leave. You can decide to continue paying pension contributions during this time, but it's a good idea to consult with an employment lawyer and financial advisers to consider your approach. You should set out any entitlement to enhanced maternity or paternity pay and continuing pension contributions clearly in each staff member's employment contract. You may decide to continue contributing to an employee's workplace pension at the end of statutory maternity leave, but not during any further period of extended leave. Specialist advice will help you determine what will best support your team and be financially viable for your business. Whatever approach you take, providing clear information to employees and allowing them to seek independent advice is vital.

Other employee benefits

The law protects every staff member's employment terms and conditions during parental leave. These include their statutory rights and contractual benefits set out in their employment contract. We've mentioned that employees are entitled to receive enhanced contractual benefits such as pay rises during their leave. Their entitlement to use their other employee benefits also continues. Employees starting a new family will likely find their needs and priorities change. It's worth creating a communication strategy for employees on family leave, to highlight benefits and services that reflect the changing priorities and practical changes that a new family brings. It's also a great opportunity to demonstrate your commitment to your employees' well-being.

If an employee has a company car, it makes sense to let them continue using it during their leave if they already use the vehicle for personal as well as business journeys. If their contract states they can use a company mobile phone for personal and business calls, a similar principle applies.

Next, let's consider some of the contractual benefits that may be particularly useful to staff on maternity leave and which features are worth highlighting.

Health insurance

Health insurance provides quick access to private medical treatment, which is useful at every life stage. Policies typically exclude coverage for straightforward pregnancy and birth, but often provide treatment for pregnancy complications. Staff can also seek advice and treatment for any illness or injury that doesn't arise from a pregnancy-related reason. Other services, such as mental health support, 24/7 virtual GP access and telephone helplines, can all be useful, particularly for new parents dealing with a sick child in the middle of the night. Some providers also offer telephone helplines staffed by midwives. Reviewing your existing policy and highlighting coverage and services that will benefit families helps you support your team and get the best return on investment.

Many insurers let employees add their children to the policy. Some ask you to pay for the first child but add subsequent children free of charge. You can offer to pay the premiums through the business, or create a voluntary scheme where employees pay to add their children if they wish to.

Death in service benefits

Death in service benefits pay a lump sum to an employee's family if they die while employed by you. The policy will still pay out to staff taking statutory maternity leave or other parental leave. The benefit will likely become even more important when an employee has a new or growing family to support, so it's worth highlighting.

Providing death in service benefits involves investing in a group life insurance policy. The policy pays a lump sum based on a multiple of the employee's normal pay. Each employee also completes a form to nominate their chosen beneficiary. When they're going on maternity leave, it's worth asking them to review their nomination form to ensure the money goes to the right person. This is particularly relevant if they've married and started a family since starting their employment with you.

Employee discounts

If you've already invested in life insurance or health coverage for your team, your policy likely includes a member reward scheme. Reward schemes offer a range of discounts and rewards, such as 2-for-1 cinema tickets, free coffees and well-being tools and apps. These can help your staff save money on their usual purchases, as well as treats such as family days out and holidays. Many programmes include discounted gym memberships and fitness tracking apps, which can encourage them to stay active during maternity leave. Some also let members earn enhanced rewards by setting and achieving activity and well-being goals.

You can also invest in a separate discount programme from a standalone provider to extend the range of benefits and services employees can access.

Your employee benefits package can support new parents and boost employee engagement and retention. We provide tailored advice to help you choose insurance that offers cost-effective employee benefits. Contact us today for a comparison quote.