New paternity laws causing headaches

They are heralded by family-friendly campaigners as one of the most important advances in equality for new fathers (or same-sex partners) for years. But the Additional Paternity Leave (APL) and Additional Paternity Pay (APP) laws to be introduced this April are still a source of worry for finance directors.

Under the new legislation, mothers will be able to return to work from maternity leave early and transfer up to six months of their remaining leave to their partner. The law comes into effect with all children born on or after 3 April 2011. But while business groups say they support extending rights to fathers, the Confederation of British Industry warns it will create a “bureaucratic tangle” and argues that mid-sized businesses will be left having to hire cover for up to 19 weeks and losing the ability to forecast their wage spend.

“The challenge is not the legislation itself, but the element of unknown it creates,” Mike Ellis, finance director of ADP, tells Financial Director. “It’s easier to plan for maternity, but now all staff could go on leave. The legislation only requires men to give eight weeks’ notice, which won’t give employers time to find their replacements.”

Don’t panic

The problem for FDs is that calculating approximate uptake of the law is difficult. Last year, a YouGov survey found that only 18 percent of men would consider taking advantage of sharing their parental leave. In January 2011, however, this had shot up to 46 percent, according to coaching provider Talking Talent. The government still claims something different - predicting between four and eight percent uptake - which works out at just 10,000 people every year.

“Don’t forget,” adds Elizabeth Gardiner, policy and political campaigns officer at Working Families, “that men need to have been with their employer for 60 weeks before they will be eligible, and would have to be earning less than their partners if they were to materially benefit. We don’t think many dads could take £124.88 a week statutory pay for six months when most tell us they can’t afford to take two weeks’ statutory paternity leave. Our message to businesses is ‘Don’t panic’.”

Other commentators are not so sure. “It’s the bureaucracy needed to prepare for uptake that we believe many FDs have yet to adequately prepare for,” says Karen Thomson, associate director of policy, research and strategic visibility at the Chartered Institute of Payroll Professionals. “Delays in software updates for payroll professionals notwith-standing, FDs need to alter their terms and conditions and plan for multiple scenarios - no matter how ludicrous - because they will happen.”

Statutory rights

Thomson also lists a number of problems that may occur when a new father takes paternity leave. “Say a father takes paternity leave and his income dramatically drops,” she says. “Is he able to pay company loans? How will pension contributions change? How are salary sacrifice arrangements impacted? Heaven forbid, but if the mother dies, is the father able to take over the full nine months of maternity? It’s a massive payroll headache.”

If couples work for the same company, this could create more problems. FDs might have to decide whether the mother or father takes priority in the event of redundancy. Additional paternity legislation provides that, in a redundancy situation where there is a suitable vacancy, the leave-taker is entitled to be offered the role. If there is only one job, however, it could be for the FD to decide whose statutory rights are more important.