16/09/2008

Employment e-Brief – Forthcoming changes to take effect in October 2008

Liz Pollock, employment solicitor

1 October 2008 – National Minimum Wage

We have previously notified you of the increases in the national minimum wage which takes effect on 1 October 2008.  As a reminder, the changes are as follows:

Workers aged 22 and over             £5.73 (previously £5.52)

Workers aged 18 -21                    £4.77 (previously £4.60)

Workers aged 16 and 17                £3.53 (previously £3.40).

(does not apply to apprentices)

5 October 2008 – OML and AML

The Sex Discrimination Act 1975 will be amended so that the distinction between ordinary maternity leave (OML) and additional maternity leave (AML) will be removed for the purposes of determining the benefits an employee is entitled to while absent on maternity leave. 

OML covers the first 26 weeks of maternity leave and AML the next 26 weeks.  Under the current law, during OML an employee is entitled to benefit from the terms and conditions of employment which would have applied to her had she been at work, except for terms providing for remuneration (that is, wages or salary).  Therefore, all benefits such as contractual holiday entitlement, company car, mobile phone, medical cover and life assurance will continue during OML.  However, there is no similar requirement for such benefits to continue during AML.

The amendment to the Sex Discrimination Act means that women will benefit from the terms and conditions that they receive during OML throughout the entire period of their maternity leave, i.e. during both OML and AML.  Please note that this amendment only affects women due to give birth on or after 5 October 2008.

One issue that arises from this amendment is the position regarding pension contributions.  The current position is that an employer is obliged to continue making pension contributions based on the employee’s normal salary (not the reduced amount she receives by way of statutory maternity pay (SMP)) for any period that she is on paid maternity leave.  This covers any period during which an employee receives either SMP (which is available for 39 weeks) or contractual maternity pay. 

However as a result of the amendment, women could claim entitlement to pension contributions for the period of AML after their SMP has run out (i.e. from weeks 39 to 52).  Although the Government guidance is clear that the amendment does not affect the current position on pensions, there is an argument that pensions contributions should be continued until the end of AML.

There is no definitive answer to this and we must therefore wait judicial interpretation to have clarity. 

Please note that the above amendment applies to ordinary adoption leave and additional adoption leave also.

5 October 2008 – Discretionary bonuses

It is already the case that, when calculating bonuses, any period spent on compulsory maternity leave (CML) (i.e. the two week period immediately following childbirth or four weeks if the employee works in a factory) must be included as though the employee had been at work.

Further amendments to the Sex Discrimination Act 1975 also make it clear that the same principle applies to non-contractual or discretionary bonuses.

This means that that when pro-rating a woman’s entitlement to an annual bonus to take into account her absence from work on maternity leave, it is unlawful to reduce the entitlement in relation to the period of CML; that period should be taken into account for the purpose of the calculation.

This change will only apply to employees whose expected week of childbirth begins on or after 5 October 2008.