Work and Families Bill

Part of the debate – in the House of Lords at 5:15 pm on 25th April 2006.

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Photo of Baroness Morris of Bolton Baroness Morris of Bolton Deputy Chief Whip, Whips, Shadow Minister, Education, Shadow Minister (Children), Health, Shadow Minister (Women), Trade & Industry 5:15 pm, 25th April 2006

My Lords, in Committee I introduced the same amendment. It would reverse inequalities among employees and reduce the unnecessary cost to the taxpayer brought about by the current rules. The rules require employers to include full annual bonuses in statutory maternity pay calculations where the annual bonus is paid to the employee in the eight-week period used to calculate statutory maternity pay. The vast majority of employees will receive their bonus in the remaining 44 weeks of the year. These bonuses are therefore not included in full or part in the calculation of their statutory maternity pay.

That clearly gives rise to gross inequalities between women in respect of the treatment of annual bonuses in the SMP calculation, which in turn could, and does, create situations where women on identical remuneration packages receive significantly different benefits while on maternity leave. That is especially unfair as the employee has no control over when their annual bonus is paid, so it is a lottery whether their bonus is included in their statutory maternity pay, although, as I said in Committee, I do not think that that was what statutory maternity pay was ever supposed to be about in the first place.

As the Government refund employers 92 per cent of statutory maternity pay, this issue should be on the Government's agenda. The current system is clearly unfair and warrants reform. The amendment would reduce the cost of statutory maternity pay to the Government, avoid giving an arbitrary and potentially significant advantage to a proportion of employees and establish a precedent that could be followed in relation to any provision for earnings-related statutory paternity pay.

In Committee, the Minister accepted the aim of the amendment. The noble Lord, Lord Hunt, suggested that to unpick one element of the system was not sustainable and would serve only to complicate the administration and understanding of the existing rules. Feedback that I have received from industry suggests that that is not necessarily the case. I would therefore ask the Minister and his department to work with HR experts further to understand the issues better and to look again at the whole system.

I understand that the Department for Work and Pensions has made a commitment to consider the case for further simplification on the way in which employers administer statutory maternity pay once the measures in the Work and Families Bill have been introduced—once again, as my noble friend Lady Miller said, making decisions after the Bill has passed through Parliament. Surely that should have been looked at in preparation for the Bill rather than after it. Will the Minister confirm that the consultation will cover bonuses?

Also in Committee, the Minister kindly offered to meet those who briefed us on this issue. I hope that in his reply he can inform your Lordships on how he feels the meeting fared. I understand that during the meeting the view was expressed by the Government that the 1992 directive on pregnant workers, which contains a no detriment clause, prevents the Government reducing the level of protection offered to workers from the level offered when the directive was passed. Therefore, I understand that the Government believe that the no detriment clause prohibits pro-rating of bonuses and statutory maternity pay as that would result in a reduction of benefits to women who are eligible to receive a level of statutory maternity pay that reflects their full bonus. I am sorry but this is a bit complicated.

I have received conflicting legal advice on this directive, which is not consistent with the interpretation of the legislation by the Department for Work and Pensions. Article 1(3) states that the directive itself,

"may not have the effect of reducing the level of protection", afforded to workers when the legislation was adopted in 1992. That terminology is crucial as it is not phrased as other parts of the directive are, in terms that expressly direct member states to act or prohibit them from acting in a specific way. As such, it is suggested that this provision does not amount to a prohibition on member states reducing or amending the level of protection offered to workers. This conflicts with the DWP's contention that to reform the SMP rules, as this amendment suggests, would put the UK in breach of this directive.

We need a system for maternity pay that is fair, robust and fit for today's labour market, which has changed enormously since statutory maternity pay regulations were first introduced—as I am sure all noble Lords would agree. The example of bonus payments suggests that the current system may not be living up to those expectations. I hope for a commitment from the Minister in his reply that the Government will continue to look at this issue. I beg to move.