Starting a family, or adding to one, begins a period of significant adjustment in most people's lives. So at this time of change, it's understandable that the last thing many new mothers (and fathers) want to be worrying about is whether their workplace has ensured they're properly protected when they go on maternity leave.
But there is a problem - most employees understand that when they go on maternity cover, it means their pay will reduce by a set amount - sometimes to just a statutory amount; other times to a much higher percentage of their usual pay.
But, we also know that at a time when people want (and need) complete reassurance, there is, in many new parents' minds, genuine uneasiness about being away on maternity - not least because the protection insurances benefits they receive (such as life assurance, and income protection) are entirely linked to salary.
Why? Because employees' salaries - the one thing that is normally so easy to define - can no longer seem to be so simple in many HR and payroll departments when the issue of maternity kicks in. In fact, pay can suddenly be a source of uncertainty. For example, is new parents' salary (for the purposes of things like four times salary for insurance purposes) now based on their reduced salary? If they're on maternity beyond their statutory period, is their pay now officially zero until they come back?
These are the questions we find more and more parents are beginning to ask, but which we find are not being answered as well as they could be by HR departments. We also find it's wishful thinking for staff to assume that payroll automatically makes all these changes correctly.
The answer to what happens to people's pay when they go onto maternity leave is actually quite simple. Their pay-related benefits remain what their exiting salary was, i.e. pre going on maternity. However, because new mothers will officially be on one rate of pay, but in reality be paid a percentage of that, it leads to all sorts of cases where a person's salary can suddenly be reported as lower than it really is, simply because they are on maternity. Worse still, we find lots of other examples where payroll will have someone's pay as 'nil' when they're actually on maternity pay.
It's not difficult to see how this can not only cause all manner of confusion, but can also expose firms to significant risk. If the worst happens, it's entirely possible insurers will not pay out, or pay out less than is rightful because that member of staff was on maternity and incorrectly given a wrong/zero or reduced salary.
And there are other problems too. Take pensions. Say a new mother is on £30,000 and contributes 5%. She's now on half pay. What now?
The answer is her employer still contributes its portion based on her earning £30,000, but she should only contribute 5% on the £15,000 that is her current earnings. Not only do we feel not enough employees know this, but employers are not good at making sure all of these changes are correctly updated. All sorts of machinations can cause problems - such as whether staff are on sick pay, and then go on maternity. There can even be issues around those that have a company car as a perk (and taxed as such), and whether that should still be paid for when someone goes on maternity.
The point is, maternity throws up complex issues of data management, when generally, the answer to dealing with someone being on maternity is not that difficult in itself. However, because silo-databases mean data resides in all sorts of places, it all contributes to the likelihood of nil or reduced pay happening when it shouldn't do.
Without proper reporting and collation of data employers not only risk having staff on maternity leave not adequately covered, but they are effectively living on the good will of insurers to say 'OK, we'll pay out, despite your mistake'. There's no way any industry should be running on good will.
HRDs and payroll professionals need to ask themselves whether they know how to properly deal with insurances for staff on maternity leave - and then tell staff themselves that they can rely on them. At what is one of the most exciting, yet vulnerable times for new parents, the least they can expect is that their employer has all back-office processes lined up properly.
John Dean (pictured) is director at Punter Southall Health and Protection Consulting (PSHPC)
