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Cath Everett

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Employers warn extending paid maternity leave will add £2.5bn in payroll costs

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Employers have reacted with dismay to a European Parliament vote extending paid maternity leave from 14 to 20 weeks, warning that the legislation will add £2.5bn in payroll costs and deter them from hiring new staff.
 
Under the terms of the Pregnant Workers Directive, maternity leave will be extended to 20 weeks on full pay. Currently female workers in the UK are entitled to a year off, with the first six weeks on 90% of their salary, followed by 33 weeks on Statutory Maternity Pay of £124.88 per week. The remainder is unpaid. The new law will also introduce compulsory fully paid paternity leave of two weeks.
 
But David Frost, director general of the British Chambers of Commerce, said the move would leave business "dismayed", following a Comprehensive Spending Review announcement that would lead to government spending cuts of £83bn.
 
"This directive should be about setting health and safety standards for pregnant workers, not adding new payroll costs for overburdened companies and national social security systems. The idea that employers or our public finances can bear an additional £2.5bn per year is deeply out of touch with reality," he warned.
 
UK businesses could only hope that member states would “curb the worst excesses of these proposals”, Frost added.
 
Member states need to back the proposals before they become law and the UK’s coalition government is expected to try and block them.
 
The Federation of Small Business (FSB) was equally unhappy with the move, meanwhile, claiming that it could cost small firms an extra £7,000 each. Its concern centres on the fact that while, under the current system, employers pay staff on maternity leave out of business funds and claim the full cost back from the government, in future the costs may have to be shared.
 
This would mean that a full-time employee on an average wage of £25,428 could cost employers an additional £7,140. As a result, it believes that parents should receive only statutory maternity or paternity pay over "the time they want off", which would “help clarify the confusing and burdensome systems currently in place – without adding any extra costs to the business”.
 
Tina Sommer, the FSB’s EU and international affairs chairman, said: "It is unfortunate that maternity and paternity leave is one of the biggest barriers for small businesses when looking to take on staff. We all know it is important to have adequate, flexible maternity and paternity leave, but it should be for elected governments to decide how much their economy can afford to give on leave and pay and how it is delivered."
 
The "well-intentioned" legislation would not help small businesses in taking on new members of staff, which was "vital" at this time of high unemployment. "In the present economic climate, we should be making it easier for people to gain employment, not placing obstacles in their way," she added.

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