Children and Families Bill

Memorandum submitted by The Federation of Small Businesses (CF 54)

Summary

1. The Federation of Small Businesses welcomes the opportunity to submit written evidence on the Children and Families Bill. The FSB gave evidence to the Public Bill Committee on Thursday 7 March 2013.

2. The FSB is the UK’s leading business organisation. It exists to protect and promote the interests of the self-employed and all those who run their own business. The FSB is non-party political, and with around 200,000 members, it is also the largest organisation representing small and medium sized businesses in the UK.

3. Our comments in this submission concentrate on three particular areas of the Bill and their implications for our members . Part 6 relating to Statut ory Rights to Leave and Pay; Part 7 relating to time off work for ante-natal care; and Part 8 on the extension of the right to request flexible working. We also comment briefly on Part 4 of the Bill relating to child minder agencies.

PART 6 – STATUTORY RIGHTS TO LEAVE AND PAY

Shared Parental Leave and Pay

4. The FSB supports the principle of giving parents greater flexibility over how they choose to take maternity leave and pay, including the ability for both parents to share this entitlement. The UK has one of the highest levels of female employment in Europe, with over 70 per cent of women in work. Despite this, the current system of maternity and paternity leave discourages many mothers from returning to work after childbirth. This is detrimental to their employers, while at the same time reducing the supply of skilled labour available to businesses that are looking to grow.

5. The current system is highly complex. The FSB’s 2011 ‘Voice of Small Business’ Panel Survey found that 50 per cent of businesses with staff thought maternity leave was complex or very complex to administer, while 53 per cent found paternity leave to be complex. When asked to rank employment regulations, 25 per cent of small firms stated that regulations on maternity, paternity, adoption leave and pay were the most time consuming and difficult to comply with.

6. If designed carefully and the administrative costs on business kept to a minimum, the FSB believes that the new arrangements for Shared Parental Leave can offer benefits to small firms. Employers often report uncertainty about a mother’s intention to return to work and their ability to contact her during her maternity leave. Anecdotal evidence from small business owners indicates that women who do not intend to return to work are often reluctant to say so, as they fear they would not be entitled to all their maternity pay if they clearly stated at the start what their intentions were. A more flexible system will, we believe, encourage greater openness and dialogue between the employer and employee at an early stage and should therefore make it easier for businesses to plan ahead and arrange suitable cover.

7. However, we have some concerns about the practicalities of the proposals. The FSB is calling on Government to ensure the following:

i. The administration of Shared Parental Leave must be as light-touch and straightforward as possible. It should be employee-led, entail minimal administrative demands on business, and ensure employers are given sufficient notice of intended leave periods.

ii. Allowing parents to request flexible parental leave in ‘chunks’ of as little as one week will be impractical for many small firms. Small and micro businesses, by definition, have far less manoeuvre for staff redeployment and many will find it difficult to recruit additional staff to fill irregular gaps in staffing. Staggered or irregular leave patterns will also be very complicated to administer from a PAYE perspective, especially if a company’s payroll is done manually.

iii. We therefore welcome the suggestion that employers will be able to turn down requested leave patterns if they are unable to accommodate them and instead require an employee to take leave in a continuous block. However, clear safeguards are needed for employers unable to accommodate particular requests: employers must not be placed in a situation whereby they risk litigation if they turn down a requested leave pattern or make a procedural error when dealing with a request. Clear guidance will therefore be needed on how employers should process leave requests.

iv. The proposal to allow a minimum of 6 weeks’ notice from the date in which a leave pattern is agreed to the date in which it can be taken [1] will, in some circumstances, be too short for small businesses. Employers need as much notice as possible with a substantial lead in period so they can forecast their business needs. This is particularly true of small businesses and those that employ specialist or highly qualified staff. Given their size, small firms often struggle when a key staff member is away from business. This will be particularly true if an employee’s requested leave patterns are complicated. While the current 8 weeks notification period is usually sufficient for current maternity and paternity leave arrangements (which consist of a single block of leave), the FSB believes the minimum notice period should be extended for more complicated leave requests.

v. Parents should be encouraged to discuss their plans for taking Shared Parental Leave with their employer at the earliest opportunity and, wherever possible, prior to the child's expected date of birth [2] (even if the full leave plans are not known). This will ensure that an open and constructive dialogue between employer and employee occurs early on and will enable businesses to better plan ahead and make any necessary adjustments on behalf of the employee.

vi. While employers understand parents’ circumstances may change, SPL requests can be formally agreed with the employer in line with the set notice periods. If an employee wishes to make any alterations to their leave patterns, these should also be subject to the default 8 week notice period, as required by the employer. In some circumstances, particularly minor change requests, employers will not need the full 8 weeks or any additional notice at all; however it should be up to the employer to decide this.

vii. However, the FSB believes that once both parents have decided on their respective SPL allocations, there should be a limit on the number of individual blocks of leave that can be requested separately [3] . Under the proposals outlined in the Administration Consultation document, an employer will seemingly be obliged to accept an employee’s requested leave pattern so long as each block within the pattern is requested separately (and the required notice is given). It is crucial that employers have confidence in the new system – however, as it stands, this proposal opens up the possibility of employees circumventing due process and effectively forcing employers to agree to leave patterns that they may not be able to accommodate.

viii. The FSB strongly believes that employers should not be placed in a position of having to liaise with one another over their respective employees’ leave arrangements, not least because of possible breaches of confidentiality this could entail. We are reassured that Government agrees, however this will depend entirely on the design and administration of the system and how it works in practice. We also understand that prospective parents will be required to complete a self-certification document to demonstrate that they are eligible for SPL. While the FSB supports an employee-led approach, Government will no doubt be alive to the potential risk of fraud from this process from an unscrupulous employee claiming money they are not entitled to from the state. We would question whether HMRC has the resources to monitor this fully.

ix. Greater consideration needs to be given to the impact of the proposals on a small business that employs both parents. The proposals will allow parents to take shared parental leave concurrently. This is unlikely to be practical for a micro firm consisting, for example, of 4 employees that employs both parents.

x. The FSB agrees with Government that there should be a time limit on the period in which parents can take shared parental leave. We feel this should be 12 months from the start of the mother’s maternity leave. Any extension of this period would go beyond the current entitlement of 52 weeks continuous leave available to mothers.

xi. Businesses need to be properly compensated for statutory payments. While we broadly support the current recovery arrangement for statutory maternity and paternity pay, it does not cover the costs of processing payments. The FSB will continue to call on HMRC to carry out an audit to find out the current costs to businesses of processing statutory payments and to ensure that small businesses are fully compensated.

8. While the FSB supports the broad principles behind Shared Parental Leave, we remain to be convinced that the new system will lead to a major step change in attitudes towards maternity and paternity leave and genuinely shared parenting. Take up of Shared Parental Leave will be heavily influenced by the families’ financial situation and the availability of adequate income replacement. The Government has conceded that in many cases mothers will choose to continue to use all or the vast majority of their 52 week entitlement. As a result, the FSB is concerned that employers will invest a lot of time and resource in understanding the new system and updating their policies and processes accordingly, for a system that could have very limited take-up. While the absence of concrete data on the likely uptake of Shared Parental Leave is understandable [4] , this will not instil businesses with confidence particularly if they suspect further changes will be made to this area of legislation in the near future.

9. The FSB therefore believes that if the Government is to achieve its aim of raising the female participation rate further still, alternative solutions will be required, such as more affordable high quality childcare to give parents greater choice as to how and when they return to work. This will be especially critical in families where the mother and/or father is self-employed. Government should take steps to address the high costs of childcare, including extending tax relief entitlements on childcare to the self-employed.

10. Lastly, with Shared Parental Leave due to come into force in 2015, the FSB notes that Government is introducing major legislative changes four years after Additional Paternity Leave came into force in April 2011 (and is now being abolished). This is a lot of change in a short space of time for small employers to digest, in an area of legislation they already find complicated [5] . As a result, Government will need to pay detailed consideration to how it is going to communicate these changes to employers once the legislation and necessary administrative arrangements are in place.

Other statutory rights

11. Purely from the perspective of ensuring maximum simplicity for employers in a complex area of legislation, the FSB broadly accepts the decision to bring adoption entitlements in line with statutory maternity leave and pay. However, as stated above, the employer cannot be held responsible for policing the system to ensure eligibility.

12. P r imary and secondary adopters should only be able to take time off to attend adoption appointments if the adoption process is sufficiently advanced and has gone beyond a mere expression of interest with social services or an adoption agency.

TIME OFF WORK: ANTE-NATAL CARE (PART 7)

13. The vast majority of small businesses allow fathers to attend ante-natal appointments , or take time off at short notice where family commitments arise unexpectedly, but they offer this on an informal basis. In the interests of making the process as flexible as possible, the FSB suggests that fathers should be able to take this time off as part of their annual leave entitlement if they prefer.

14. Fathers are currently entitled to two weeks of paid paternity leave. The Government has announced it may review the paid paternity leave entitlement in the future. The FSB does not think any changes are appropriate in the current economic climate . Given the wholesale changes being made to the system, including the recent introduction and (as a result of this Bill) abolition of Additional Paternity Leave, any further changes in the area of paternity leave and pay would add further confusion to small businesses.

15. On a separate note, the FSB agrees that paternity leave rights should not be automatically granted if a father changes employer during the pregnancy. We welcome the Government’s intention to retain the 26 week qualifying period for length of service by the 15th week before the baby’s due date.

EXTENSION OF THE RIGHT TO REQUEST FLEXIBLE WORKING (PART 8)

16. There is strong evidence to suggest that a majority and growing number of small firms already offer flexible working to their staff above and beyond the current statutory requirement. A 2008 FSB member survey found that two thirds of small businesses offered flexible working, of which only 4 per cent restricted this to parents with small children. Similarly, the 2011 Workplace Employment Relations Survey has found that 84 per cent of employers who offer flexitime make it available to all employees (with only 10 per cent restricting flexitime to those employees with a statutory right to request flexible working. [6] A 2009 poll of FSB members found that 47 per cent of small businesses have staff who work part-time, 29 per cent have staff that work flexible hours and 27 per cent have staff who work from home.

17. Small businesses increasingly recognise the many business benefits of flexible working, such as the potential to boost productivity, staff morale and retention, and the reduction of office overheads. Small firms are competing for good employees just like any other business and they know that flexible working is increasingly commonplace and a benefit that is increasingly valued by employees.

18. Furthermore, the propensity of small firms to offer flexible working is characteristic of the nature of the relationships between small business owners and their staff, which tend to be far less formal in small firms. This has positive implications for employee relations. Statistics from the TUC and YouGov [7] show that employees in small firms have among the highest levels of job satisfaction and sense of attachment to the business, while academic research finds significantly lower levels of work-related illness and sickness absence among staff in small firms. [8]

19. The extension of the right to request is therefore, in our view, wholly unnecessary. It will increase the administrative burden and hence business costs for the smallest of firms, create confusion (the right to request is only a right to a process, not a right to work flexibly) and potentially undermine the cooperation and mutual benefits of current arrangements. Dealing with formal rights to requests may be relatively easily accommodated by public bodies and large firms, but it is manifestly more onerous and time-consuming on the smallest of firms who do not have HR departments to deal with such formal requests. Under the proposed legislation, appeals can be made if requests are turned down and this is likely to be particularly burdensome for small firms. Worse still, small businesses may end up finding themselves having to fight litigation claims as a result of inadvertently failing to follow a due procedure as set out in the proposed ACAS Code of Practice. This cannot be good for business or for their employees in any circumstances.

20. The Government’s Impact Assessment on extending the right to request showed that the majority of one-off implementation costs will fall on micro businesses, employing between 1 and 9 staff (the total cost on micros is estimated to be £13.2 million compared to just £0.4 million for firms with 250+ employees). There is reason to believe that these costs will be higher in reality. The IA assumes implementation costs on the basis of time being spent by a HR manager. As we have said previously, micro firms simply do not have in house HR managers - instead the task will fall on the business owner, whose costs will be higher not least because he or she will be spending time on implementation rather than on other business needs. The cited costs also exclude ongoing administration costs of dealing and processing with requests, and the costs of dealing with any subsequent appeals or litigation proceedings.

21. We therefore call on Government to conduct a thorough assessment of the costs of the proposed extension on small businesses (with up to 49 employees), encompassing both implementation and administration costs. Although we do not believe this legislation is necessary for employees in any business regardless of size, the FSB believes that Government should, at the very least, reconsider making micro businesses exempt from the extension of the right to request flexible working for the reasons stated above. We take into account, however, the European Parental Leave Directive requirements that parents returning from a period of parental leave must have the right to request flexible working regardless of the firm size.

22. Rather than proceed with this legislation, the FSB strongly believes that the Government should prioritise ‘softer’ approaches to further promote flexible working. The Government has previously acknowledged that legislation can only go so far and we thus feel that Government should further explore informal approaches before extending the statutory process. The FSB continues to believe that the public sector should lead the way in showcasing different types of flexible working. Furthermore, more needs to be done to clarify the different forms of flexible working and communicate the business benefits on offer – for instance, how job sharing can provide businesses with a greater range of skills at their disposition or how staggered hours can enable businesses to stay open for longer.

23. The Government could also do more to encourage employers to think about how they might design flexible jobs at the recruitment stage. The FSB has previously worked with Job Centre Plus to help small businesses design part time and flexible jobs. Advisors operating the Small Business Recruitment Service now talk to small businesses about the wide range of flexible working options and the benefits of offering such flexibilities when recruiting.

24. Nevertheless the ability of the employer to offer flexible working will always depend on circumstances unique to the business. In a busy high-street retailer for example, it is highly unlikely that the owner would be able to accommodate a request from a cashier to work from home. The proposals state that an employee exercising the right to request flexible working should identify how the business might be able to accommodate the flexible working request and how it will benefit the business. In reality, there will be many employees who are unable to provide this information, yet the business will nevertheless be required to respond to the request in a formal and prescribed manner, thus incurring cost and administrative time.

25. We are not convinced that legislation is necessary to embed flexible working and could in fact be counterproductive to the Government’s policy aim. The extension of the right to request to all employees could mean that small businesses treat all requests (informal and formal) the same and therefore will be less inclined to grant informal flexible working requests. Given that informal requests will be quicker and easier to agree (the right to request flexible working will need to be dealt with by employers within 3 months, whereas an informal request could be granted there and then), the employee will stand to lose out. In the smallest of firms where paperwork usually takes longer to complete, employees could in fact find it more difficult to get a timely agreement from their employer to work flexibly than if they merely made an informal request.

26. The Government suggests that replacing the existing procedure for dealing with rights to requests for flexible working with a duty to consider such requests ‘reasonably’ will result in ‘a shift towards more informal processes’ [9] . We strongly doubt this to be the case. Employers will be mindful that any extension of the right to request will require them to follow a formalised process as set out in a Code of Practice. Hence, employers will be extremely cautious and follow the full procedure because they will not want to end up in a tribunal on procedural grounds. We therefore do not support the argument that the proposed procedure will be significantly less arduous on the employer.

27. Furthermore, the issue of how an employer will deal with multiple or conflicting requests without repercussions remains unclear. Turning one formal request down in favour of another may generate a negative atmosphere in the workplace and could potentially lead to claims of indirect discrimination. Clear communication will be needed from Government that this is only a right to request and not a given, and how businesses should deal with multiple requests. This will help businesses manage employees’ expectations.

28. The FSB remains opposed to this proposal for the reasons highlighted above. We do however support the Government’s decision to retain the requirement that employees can only make one formal request (using the right to request) within a 12-month period.

CHILDMINDER AGENCIES (PART 4)

29. Clause 75 repeals the duty of local authorities to assess the sufficiency of childcare provision. Child minders and nurseries currently register with, and are regulated, by Ofsted. The FSB believes that this amounts to a sensible streamlining measure and should help alleviate some of the costs of inspection and compliance incurred by small child minder businesses.

March 2013


[1] The FSB understands that 2 weeks will be set aside to discuss and agree a leave pattern with the employer, followed by 6 full weeks’ notice.

[2] This conforms to current maternity and paternity leave provisions. In both cases, parents are required to inform their employer at least 15 weeks before the mother’s expected week of confinement, unless there are health reasons that require a mother to take maternity leave early in which case she does not need to give the required notice.

[3] BIS terms these as ‘new notification requests’.

[4] BIS concedes its estimates are approximations due to the inherent difficulty of predicting how families will respond

[5] T he separate system of Unpaid parental leave is also changing: from March 2013 unpaid parental leave will increase from 13 to 18 weeks in order to comply with the EU Parental Leave Directive. The period for taking thi s leave will also be extended; parents will have until their child’s 19 th birthday to use their leave (it currently needs to be used before the child’s 6 th birthday) .

[6] The 2011 Workplace Employment Relations Survey, First Findings, January 2013, p.32

[7] ‘What workers want’ YouGov and TUC poll of more than 2,500 people at work in Britain. 2 nd September 2008 http://www.tuc.org.uk/extras/pollfigures.pdf

[8] Small Businesses in the UK: New Perspectives on Evidence and Policy . University of Westminster. Commissioned by the Federation of Small Businesses, November 2008 http://www.fsb.org.uk/policy/images/fsbwestminster01%2012%20%283%29.pdf

[9] ‘Consultation on Modern Workplaces: Extending the Right to Request flexible working to all Impact Assessment’, BIS, May 2011, p. 30.

Prepared 20th March 2013