Select Committee on Social Security Appendices to the Minutes of Evidence


ANNEX 2

Options for paying for parental leave


OPTION ONE—flat-rate, paid by employer like SMP—reimbursed OPTION TWO—earnings related, paid by employer and reimbursed OPTION THREE- top-up to Working Families Tax Credit OPTION FOUR—Individual Savings and Loans Scheme

Equality of opportunityPromotes equality of opportunity because individual entitlement, not means tested and pay goes to the leave taker. Promotes equality of opportunity because individual entitlement, not means tested and pay goes to the leave taker. Does not promote equality because based on family income not individual right. In some cases pay may not go to the parental leave taker where WFTC is claimed by the other parent. Will not promote equality between the sexes. Main responsibility for financing parental leave will rest with the parent.
Impact on take-upTake-up will be higher than unpaid leave; but will depend on level of benefit. Men less likely to take leave than under earnings-related scheme. Take-up will be higher than unpaid leave; but will depend on percentage paid. Men more likely to take leave in this scheme than any other option. Women's take-up also high. High take-up by those eligible, but no incentive for other parents to take parental leave. Take-up by men likely to be low. Take-up likely to be little higher than with unpaid leave—those who can save will already do so. Unlikely to encourage male take-up.
Opportunity for flexibilityShould be easy to provide on flexible basis—shorter blocks of leave or part-time. May be less easy to combine with flexibility because of difficulty of calculating percentage incomes each time. Unlikely to be consistent with flexibility in taking leave—because of administrative difficulties Could be associated with flexible take-up.
Ease and costs of administrationAdministration would be borne largely by employers. In line with other employment-related benefits—administration relatively straight forward. Administration would be borne largely by employers. In line with other employment-related benefits—administration more difficult than with flat-rate pay. Will be complex and costly to administer. Would be out of line with all other employment benefits which confer individual entitlement Administrative costs can be high with this approach.
Costs to GovernmentWould involve significant costs to Government—as in other EU states. Actual costs would depend on level of take-up and rate of pay. For £60 week pay, mothers take-up 30 per cent, fathers take-up 10 per cent, costs will be £105 million. For £100 week pay, and take up for 70 per cent women, 30 per cent men, costs will be £450 million1. Would be the most expensive option for Government, involving higher levels of payment than other schemes and higher take-up. Assuming 90 per cent take-up by mothers and 50 per cent take-up by fathers, costs for 30 per cent earnings will be £250 for mothers, and £785 million fathers; if 100 per cent earnings, £830 million—mothers and £2,610 million—fathers. Will increase costs of WFTC to Government, but overall costs likely to be lower than other pay schemes because limited numbers will have entitlement. If Government gives tax relief to encourage savings, will involve some costs, but far less than for other options.
  
  
Other commentsEmployment-related benefits like SMP are not paid to those earning below LEL—mostly women. Any parental pay system should be adjusted to enable low paid parents to claim parental leave pay. Employment-related benefits like SMP are not paid to those earning below LEL—mostly women. Any parental pay system should be adjusted to enable low paid parents to claim parental leave pay. Would concentrate state help on lowest paid families, and likely to be more helpful to lone parents than other options.Would be a major shift in way right to an employment benefit calculated—from individual right to means testing. Could cover the self-employed as well as employees.
   
   

1 Data on take-up for flat-rate and earnings-related pay from Parliamentary answer, Hansard House of Commons, 17/5/99 col 251.





 
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