Mums, Dads and Employee Share Schemes
The Coalition's proposal to change the parental leave entitlement has met with mixed reviews. But how these affect the operation of employee share schemes?
Under the proposed changes a mother returning to work before the end of maternity leave will be able to transfer the remaining time to the baby's father*. In addition the overall allowance could be shared between parents; either at the same time, in stages, or indeed, taken in blocks rather than as one continued period.
By enabling both parents to take parental leave in sections there are likely to be some issues with continuity, for example in relation to any contributions being made to a Share Incentive Plan (SIP).
Whilst a participant is still being paid, contributions to a SIP may continue as normal, unless the participant instructs for payments to stop whilst on maternity/paternity leave. A participant's contributions must not exceed 10% of gross pay, a figure which of course is likely to change if extended periods of leave are being taken; the Company's payroll/HR must monitor this as any excess deductions will need to be repaid. Further, if a participant goes onto unpaid maternity/paternity leave then contributions must stop.
Alternatively, under an Save-As-You-Earn (SAYE) scheme, participants are able to suspend their contributions to the plan for up to six months whilst on leave.
The situation is different again under an Enterprise Management Incentive (EMI) or a Company Share Option Plan (CSOP) where, options will not lapse until the time and date when the Participant ceases to be entitled to exercise his/her right under the Employment Rights Act 1996 to return to work in any Group Company.
Whilst a move to more shared parental leave is clearly beneficial for the sake of families, such plans are going to require extreme diligence on the part of HR departments and payroll in order to ensure the smooth running of operations within a business.
What of the wider reaction? The proposals have been welcomed by Unions and working parent groups who have often claimed the current system of maternity leave is positively Edwardian.
By contrast, business groups such as the British Chambers of Commerce (BCC) have criticised the plans as out of touch with business owners. David Frost, Director-General for the BCC stated that Business is not against the principal of shared parental leave, but how is an employer expected to plan and arrange cover with this fully-flexible system? Certainly, the prospect of a more flexible paternal leave system is desirable to families, but Frost's point does need to be considered seriously. In an already stretched economic climate, how are businesses, especially SMEs, likely to cope with such changes, especially with regard to administration of HR and any benefit schemes in operation?
For further details of the effect of maternity leave on the operation of employee share schemes, please contact us on 020 8949 5522 and ask to speak to one of our advisers.
* The current qualification of such includes the child's biological father; the husband or partner of the child's mother; the child's adopter or the husband or partner of the child's adopter.