Short-changed? Is Statutory Maternity pay enough?

The FPI graded Britain a ‘C’ because  Statutory Maternity Pay (SMP) is paid at 90% of your average gross weekly earnings with no upper limit for the first six weeks and for the remaining 33 weeks at the lower of either the standard rate of £124.88, or 90% of your average gross weekly earnings, if you qualify. You also pay tax and National Insurance in the same way as on your regular wages.

This means that the SMP rate actually drops below the National Minimum Wage (NMW) rate which is £5.80 per hour for workers aged 22 and above. On the basis of an average eight hour day this works out as £232 per week for a full five-day week. This equates to a difference of just over £100 per week between what you get on a NMW rate and what you receive on an SMP rate.

According to another survey this drop in income comes at just the wrong time with the added expenses that a baby brings. Research by price comparison website, uswitch.com claims that the average family sees a 34% drop in their net monthly household income during the maternity leave period. Income drops amongst respondents from £3,431 a month to £2,266 a month while on statutory maternity pay.

At the same time costs rocket with the average mum spending £2,152 on baby items prior to giving birth and an additional £2,521 once the baby arrives, claims the survey. Sadly, four in ten new mums (41%) end up in debt during maternity leave. The average debt incurred is £1,329.  One in ten (9%) end up re-thinking their intention to be a stay-at-home mum, while a further one in ten (9%) are forced to cut their maternity leave short, returning to work sooner than they had intended in order to make ends meet.

So what levels would women like to receive? What is ‘enough’? Could businesses realistically cope with a hike in SMP levels?

Sandra Wallace, partner and head of equality and diversity for legal practice DLA Piper, says that we mustn’t overlook the good work that has been achieved in giving mums more time off work and more rights when it comes to maternity.“There has been a concentration on providing additional maternity rights with shared maternity leave provisions between mums and dads on the cards and the extension of paid time off from six months to nine months,” she says. The problem, says Sandra, is that it’s a controversial subject and particularly so in a climate of recession and cost cutting.

“It could backfire. Employers think that there is growing pressure in this area already and it might act as a disincentive for businesses to take on women of child-bearing age,” says Sandra. It’s a point that has been picked up by other surveys. In the Women and Work Survey 2010 by Grazia magazine, surprisingly six out of ten female directors said they thought working mothers have ‘enough rights’ and worryingly, 74% of them think working mothers’ rights and maternity benefits are ‘putting employers off the employment of women’. Half of all women believe this too.

However, reassuringly, rather than backtracking on progress made by women, their preferred solution is to give working dads ‘exactly the same rights as working mothers’. More than half of women (52%) think ‘working fathers should have exactly the same rights as working mothers’ to stop men being more attractive to employers than women’.

The other problem says Sandra is that if you hike up the SMP level then the Government may be obliged to do that across the board. “The difficulty is that you’d have to start applying the rule to other benefits such as sick pay.” The  British Chambers of Commerce (BCC) also says that ‘constant tinkering with pay levels isn’t desirable’ either.

Whatever view point you take, the matter may soon be resolved as the Pregnant Workers Directive is currently going through the European Parliament and is looking at this very issue. The BCC say that no change should happen at the national level until it is understood what the outcome of the Directive is likely to be.

The plan which has been passed by a European Parliament committee is to make firms pay new mothers their full salary for at least 20 weeks. The UK government opposes the Pregnant Workers Directive, but some Labour MPs back it. If it goes through, it would effectively treble statutory maternity pay in the UK.

Commenting on the plans, BCC employment adviser Abigal Morris said: “Any increase in statutory maternity or paternity pay would have to be paid for by the state in the first instance. The outcome of this would be to either worsen our fiscal position or lead to further tax rises, on either business, employees or the consumer. Our view is that this does not make sense in the current economic climate.”

It’s a view that Sandra shares – she warns  the timing is just not right. Abigal adds: “What is also clear is that whilst the UK has a low level of statutory pay, they also allow women to take a longer amount of time off than in some other EU countries. There are also generous provisions in terms of returning to work. Therefore, whilst the UK’s maternity pay may have been graded a ‘C’, looking at this one element of the maternity package available to women is not that helpful.”

What is clear is that there will always be a tug-of-war in the intellectual battle on maternity pay which sees mums desperate for a better standard of living whilst on maternity pay and, businesses keen to keep costs to a minimum. We await the outcome of the Directive and further guidance from the coalition on how they will help mums in the future.