With changes to Statutory Paternity Pay due to take effect in April 2011, Mike Bull, Customer Support Manager at Sage UK investigates the impact this will have both for British businesses and individual taxpayers.

 
Nick Clegg’s plans to make parental leave more flexible by allowing mothers and fathers to share time off after a baby’s birth has been heralded by Government as “rescuing the UK from an Edwardian system” of parental leave. Extending rights for new parents by allowing fathers to extend their leave by a further six months off work to look after their children under the Additional Paternity Leave Regulation 2011, have been warmly welcomed by families and working fathers. But what are the implications for employers? With experts warning the proposals could land employers with up to a £30m annual bill, we consider the implications of changes to Statutory Paternity Pay and the likely impact it will have for UK companies.
 
First things first – what are the proposals?
As of April 2011, Additional Statutory Paternity Pay (ASPP) and Additional Paternity Leave (APL) will be introduced as part of the Work and Families Act, to provide families with greater flexibility when arranging child care. Initially agreed by the previous Government and since adopted by this one, the Additional Paternity Leave Regulations give fathers to parents of children due, or matched for adoption, on or after 3 April 2011 the right to claim up to six months (26 weeks) of APL over the current 2 weeks Statutory Paternity Pay (SPP), providing the mother returns to work early. In essence, this gives fathers – as well as spouses and civil partners of new mothers or adopters – the opportunity to play a greater role in the first year of their new child’s life by sharing maternity leave with the mother is she chooses to return to work early. ASPP can be taken between 20 weeks and one year after the child is born.
 
Win-Win?
The proposed changes to ASPP are understandably a welcome introduction for families seeking to alleviate the burden of childcare by splitting maternity and paternity leave in “whichever way suits them best.” Yet despite proving politically popular, Nick Clegg’s proposals have been condemned by business groups as placing employers under excessive new legislative pressures, operational and administrative challenges and yet more red tape. Indeed, as businesses continue to contend with challenging economic conditions, there is a danger that the administrative burden of a new fully flexible system of parental leave will become unmanageable for all but the largest employers.  
 
As the legislation stands, employers are responsible for the entitlement and calculation of Statutory Maternity, Paternity and Adoption pay, which is already a complicated and resource-intensive procedure. Add to this the introduction of ASPP and the ability for employees to take leave in short blocks and associated pay becomes increasingly complex.
 
So who pays?
Businesses will not be obliged by law to award fathers the same parental pay that they currently offer mothers. But as a growing number of companies offer the perk to attract and retain the most talented people, employers will come under increased pressure to provide the same benefit for both men and women. Government view the introduction of ASPP from April 2011 an interim measure and a step in the right direction towards introducing a flexible system of shared parental leave in 2015. HR Consultancy NorthgateArinso has forecast that approximately 8% of employers will offer men the same paternal pay as women if the rules change in 2015, with as many as 20,000 men likely to take up the new rights. Under this scenario, employers could be faced with an annual bill of £15.4m for enhanced paternity pay based on the average male salary and a typical maternity pay scheme of three months at full pay and three months at half pay. 
 
Vigilance is critical
At Sage, we have enhanced the functionality within all of our payroll modules to cater for the new legislative requirements. This will undoubtedly minimise the burden placed upon the employer by automatically calculating the employee’s entitlement to ASPP, identifying how much is payable and on what date, as well as taking care of all reporting requirements – including the P11, P14 and P35 – with little input required by the user. Yet, whilst payroll software can play a critical role in helping organisations to effectively navigate the complexities of ASPP, the new system is extremely difficult to police and thereby open to abuse from the submission of fraudulent claims. This means employers must be prudent to ensure that all ASPP claims are both valid and justified before committing to granting leave.
 

Mike Bull is Customer Support Manager at Sage UK