MATERNITY BENEFITS (Hansard, 8 March 1994)

The Parliamentary Under-Secretary of State, Department of Social Security (Viscount Astor)

In August last year my right honourable friend the Secretary of State issued a consultation document which described options available for adapting our maternity benefits schemes to the requirements of the EC Directive on the Protection of Pregnant Women at Work.

We are grateful to all those organisations and individuals who responded. Their contributions proved very valuable in helping us to reach our final decisions.

The main proposals of the new scheme are:

Any woman who has been continuously employed in the same job for 26 weeks will be entitled to Statutory Maternity Pay (SMP). This simple test replaces the present three tests which currently result in different rates of maternity pay depending on whether a woman has worked for 26 weeks,2 years or 5 years in the same job.

All women who qualify for SMP will now receive

the higher rate (90 per cent.) of earnings for the first 6 weeks of their maternity leave, and

for the remaining 12 weeks, the standard rate of SMP, which is increased by £ 3.70 per week to £ 52.50 in line with Statutory Sick Pay (SSP).

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Maternity Allowance (MA) is increased to £ 52.50 for qualifying employees; other recipients not covered by the directive will continue to receive £ 44.55.

Women claiming MA will have a longer period before their baby is due to satisfy the 26 week contribution conditions (66 weeks instead of the present 52).

Maternity leave and pay can begin at any time after the start of the 11th week before the week the baby is due. However, if a. woman is on sick leave because of her pregnancy and there are fewer than 6 weeks before the baby is due, she will be deemed to be on maternity leave and entitled to maternity pay.

To pay for the additional cost of around £ 55 million a year the rate by which employers are reimbursed for the SMP they pay out is to he reduced to 92 per cent. from 4 September 1994. However, small employers will be completely protected. They will continue to be fully reimbursed for the cost of any SMP they pay. The definition of "small employer" will be the same as the improved SSP definition from April—employers who pay £ 20,000 or les; annually in gross national insurance contributions. Two-thirds of employers—approxim-ately 750,000 businesses—will be helped.

As a whole employers will not be out of pocket. The reduction in employers' National Insurance contributions announced in the Budget will more than compensate employers for the abolition of SSP reimbursement as well as the reduction in SMP reimbursement. The result of this package is a net gain for employers of some £ 125 million.

Allowing women to receive SSP in the later stages of pregnancy if they are sick for reasons other than pregnancy will also add an extra £ 10 million in SSP costs. The combined cost of these changes means a total cost for industry of £ 65 million a year—less than 0.03 per cent. of the national wage bill, or approximately £ 230 per expectant mother receiving maternity benefits.

The new arrangements will apply to women expecting a baby on or after 16 October 1994. The first payments for these, women under the new rules will be made from the end of July (since women can take maternity leave up to 11 weeks before their baby is expected).

These improved maternity payments will benefit 285,000 women. At the same time we have simplified the scheme to make it easier for employers to administer and women to understand.

The Secretary of State will shortly be laying regulations to give effect to these proposals.