UK lags many countries on “replacement rate” for state maternity pay

The UK is falling behind many countries when it comes to the “replacement rate” for state maternity pay, a new report has shown.

The UK’s statutory maternity pay replaces 27% of a woman’s average earnings in the private sector over one year, according to the report from the Resolution Foundation, a think-tank. The average “replacement rate” across 34 developed countries is 40%. Over a dozen of those countries, mostly in Scandinavia and eastern Europe, have a replacement rate of over 50%.

The Low Pay Britain 2023 report looks at how the UK has made good progress in raising its minimum wage, but it continues to fall short on “minimum standards” for workers, such as sick pay, parental leave, and zero-hours contracts. The report compares the UK with other countries in the OECD, an international group of developed nations.

“We should celebrate the progress that Britain has made on tackling low pay thanks to the National Living Wage, while recognising that we have a long way to go on job quality,” Nye Cominetti, a senior economist at the Resolution Foundation, said in a statement.

“Too many low earners suffer from poor-quality work, be it from inadequate sick pay or unacceptable uncertainty about when they will be expected to work.”

In the UK, female employees are entitled to 39 weeks of state maternity pay. The rate is 90% of their normal pay for the first six weeks, dropping to a flat rate of £172.48 per week for the next 33 weeks. Most other European and OECD countries offer more generous packages, generally by providing earnings-related payments for longer periods of time, the report says.

Maternity Action, a campaign group, has called for state maternity pay to be raised so it is in line with the minimum wage for a 35-hour work week. This would be over £350 per week in most cases (minimum wage rates vary depending on the worker’s age).

“Miserly sick pay rates”

The report also shows that the UK has the lowest statutory sick pay rate of almost all OECD countries, aside from the United States and South Korea which do not offer this type of support to workers at all.

In the UK, employers are not legally required to provide sick pay for the first three days of an illness and the statutory rate after that is £109.40 per week. This means a full-time worker on minimum wage receives just £43.76 for a week of sickness, to compensate for lost earnings of £390, the report says. 

“Nobody should be plunged into financial hardship if they become sick. But Britain has one of the most miserly sick pay rates in Europe,”  Paul Nowak, general secretary of the Trades Union Congress, said in response to the report’s findings. He added that statutory sick pay should be raised and should be available from day one of an illness.

A separate poll by the Chartered Institute of Payroll Professionals, also released today, found that nearly two-thirds (63%) of its members think sick pay rate should be higher. More than half of respondents also said employees should get sick pay from day one.

The Resolution Foundation is calling for a review of these “minimum standards”, especially as they disproportionately affect low-paid workers who cannot afford dips in their income. Many workers on higher incomes are also entitled to fully-paid sick leave and “enhanced” parental leave schemes, as part of the benefits provided by their employer.

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