EU Regulation harms the job prospects of young women

The European Union (EU) is drafting plans to massively increase small businesses costs. The EU plan to extend women’s right to full maternity pay from six to eighteen weeks. A grand move you might say. How could anyone disagree? But consider it in more detail and its effects are more pernicious.

This move will lower the incentives for small businesses to hire women of child bearing age further reducing womens career prospects. It will also endanger the future of many small businesses struggling to survive during the current recession. In short, it is the wrong move, at the wrong time and must be stopped.

Currently UK maternity leave standards exceed the EU minimum. British mothers are entitled to a years leave, whereas the EU only requires its member states to give mothers a right to fourteen weeks leave. In the UK, over nine months of maternity leave, is paid provided the woman has worked at the company for six months or more. Six weeks of this leave are paid at ninety per cent of full pay with thirty three weeks then paid at a rate of £117.18 a week. This thirty three week period is called Statutory Maternity Pay (SMP). The remaining thirteen weeks are unpaid. Under the new EU proposals mothers would be entitled to eighteen weeks at full pay. In addition the British Government is looking to increase statutory maternity pay to fifty two weeks as of 2010. So what will be the effects of these policy changes?

There will be four main effects brought about by these changes. Firstly, small businesses face an increase in the amount of pay they have to provide mothers with and the duration of such payments i.e. a mother’s current right to ninety per cent of full pay for six weeks will be increased to a right to one hundred per cent of full pay for eighteen weeks. Furthermore, as a spokesman from the Federation for Small Businesses said, we should also consider that “Not only would they have to pay the employee; they also have to pay for a replacement." These replacements are temporary by nature and thereby often cost more than the rate the existing employee was earning. In the current recession increasing costs on struggling small businesses is not the best idea. The EU should in fact be looking for ways to reduce such costs.

Secondly, the Government subsidises statutory maternity leave so it will now face a higher maternity leave bill. While under current treasury rules firms can reclaim some of the costs of SMP from the Government it is unclear whether this arrangement will continue if the EU extends the amount of statutory maternity leave. If the Government insists on implementing its proposed increase in the amount of maternity leave to fifty two weeks, it will have to finance an additional thirteen weeks of SMP. In addition if the current entitlement to full pay is tripled from six to eighteen weeks then the Government will either have to subsidise this which means high taxes or pass the costs off on to businesses which means higher costs for consumers. Either way many ordinary Britons will be worse off as a result of these changes.

Thirdly, employers are fighting back by refusing to hire young women as full time employees. Instead employees are hired on fixed term contracts which are then renewed as and when necessary. This means the employee can be sacked more easily and has less employment rights then their full time equivalent. Further reducing the job security of young female Britons will not be welcomed.

Fourthly, some employers are beginning to refuse to hire women of child bearing age at all. Sir Alan Sugar, a British entrepreneur famous for starring in a successful British television series called the apprentice has said that many employers put the cv’s of women of child bearing age into the bin. A view also put forward by the head of the Equalities and Human Rights Commission, Nicola Brewer.

So the proposals of the EU and the British Government increase the cost to businesses, consumers and taxpayers. They also reduce the career opportunities for young women. These proposals need to be abolished and replaced with sensible measures to ensure both adequate maternity leave and the small business development and economic growth we all need to get through the current recession.

Comments

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amendment to exempt small firms etc with profit under set limit, laws to protect the applicant from discrimination that applies to the firm that meet or exceed the threshold.