Parents complain of unfairness over income protection schemes

People on parental leave could see their income significantly impacted under the coronavirus protection schemes for self-employed and employed workers because of the way the schemes calculate their earnings.

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Statutory Maternity Pay is payable at two different rates

Self-employed parents who have given birth during the last three years could see their income penalised under the Government’s income support scheme for those affected by the coronavirus crisis, according to a leading campaign group.

Maternity Action has written to the Chancellor asking that, because the entitlement to support under the scheme is based on taxable profits from 2016/17 to 2018/19, parents on maternity, paternity, shared parental or adoption leave or taking an equivalent break from their self-employed roles should have these periods disregarded in the calculation of profits.

Self-employed mothers are not eligible for statutory maternity pay and can claim Maternity Allowance. This is paid at the flat rate (£148.68) while SMP is 90% of pay for six weeks followed by 33 weeks at the statutory rate. MA is also treated as income under Universal Credit regulations, unlike SMP, significantly reducing the amount paid to self-employed women who need to claim Universal Credit and Maternity Allowance. This can mean they miss out on Universal Credit totally or are unable to access other benefits such as the Sure Start Maternity Grant.

One self-employed mum wrote to us about her situation. She says she has lost all of her work for the foreseeable future directly due to the coronavirus crisis. However, she says calculating income support based on her earnings over the last three years will “massively” affect what she gets as she had a baby in 2016. She says: “Prior to 2016 I worked full time, long hours. I took one year off work as this is my one and only baby I had at the age of 39. Then I went back to work four days a week in 19-20 tax year…Support to PAYE employees is being calculated on their current wage. This is unjust enough in itself against the self-employed.”

Maternity Action’s letter also says that parents who are furloughed under the Government’s Job Retention Scheme, under which employees are able to get 80% of their wages capped at £2.5K a month, could miss out on statutory maternity pay, statutory paternity pay, statutory adoption pay and statutory shared parental pay or face significantly reduced payments if their income in the qualifying period [between 18 to 26 of pregnancy or two months prior to matching for adoption] if their earnings fall below the Lower Earnings Limit (£120). The same applies to statutory sick pay.

Maternity Action is calling for entitlements to be based on normal pay during the calculation period rather than the lower rate of 80% furlough pay or statutory sick pay.

Moreover, government guidance suggests that the calculation of furlough pay is based on the employee’s actual salary as of 28th February, disregarding any fees, commissions or bonuses. That means those on parental leave could face very low or no payments at all if they are placed on furlough. Maternity Action says furlough pay should be based on normal contractual salary as of 28th February.