Landmark review into parental leave and pay

The amount of time off and pay new parents can receive after the birth or adoption of a child is set to be re-examined in a “landmark” government review.

The review aims to improve the system and ensure it better supports working families. In this blog, Lodders’ Employment team explains what this could mean for both employers and employees.

Bold action required

A recent report from the Women and Equalities Committee has highlighted the current system’s shortcomings, branding the UK’s parental leave offering as “one of the worst….. in the developed world”, citing “fundamental flaws” that urgently need addressing, particularly for paternity leave.

The report found that, at considerably less than half of the National Living Wage, rates of statutory pay are out of kilter with the cost of living, causing financial hardship in many households. The Committee has urged the government to take ambitious steps, although it acknowledges that any meaningful change will require significant financial commitment.

Other issues flagged in the report include:

• Only two weeks of statutory paternity leave is among the lowest in OECD countries and limits shared parenting.
• Shared Parental Leave (SPL) is underused (5% uptake) due to complexity, eligibility restrictions, and poor pay.
• The system reinforces outdated gender roles, contributing to the gender pay gap and “motherhood penalty.”
• Self-employed fathers and many low-income workers are excluded from leave/pay entitlements.
• Lack of provision for kinship carers, single parents, and parents of multiple births.
• Cultural stigma, employer resistance, and gendered services discourage many fathers from taking leave.

The Business Secretary, Jonathan Reynolds, has echoed the need for reform, stating that the existing system is “really confusing”, involving eight different types of leave, and that it is “not particularly generous or supportive compared to other countries.” He also highlighted that one in three fathers takes no paternity leave at all, a sign that the current model is not working for modern families.

What is under review?

The government’s review expected to span 18 months, seeks to modernise the system, which has seen little reform in decades despite seismic shifts in working patterns and family dynamics. So, we are unlikely to hear about any recommendations until early 2027.

The review will cover all current types of family leave and pay. This includes (but is not limited to) the following:

1. Maternity leave and pay

Statutory maternity leave allows most new mothers and birthing parents to take up to 52 weeks off work, with up to 39 weeks of statutory maternity pay. This includes 90% of average weekly earnings (before tax) for the first six weeks, followed by either £187.18 per week or 90% of average weekly earnings – whichever is lower – for the remaining 33 weeks. However, this support does not extend to self-employed individuals (who may instead be entitled to Maternity Allowance) or those earning below £125 per week.

2. Paternity leave and pay

Statutory paternity leave, introduced in 2003, allows eligible new fathers and second parents up to two weeks off work, with pay matching the same weekly limit as maternity leave. Again, this benefit is inaccessible to those earning under £125 per week or who are self-employed and equates to less than half the National Living Wage.

3. Shared parental leave and pay

Shared parental leave, brought in during 2014, allows up to 50 weeks of leave and 37 weeks of pay to be shared between parents after the birth or adoption of a change, but uptake remains very low.

While some employers enhance statutory parental leave and pay with additional benefits, the government has acknowledged that affordability remains a barrier for many working families, with many fathers opting out of paternity leave entirely because they cannot afford to take it.

What reform can we expect?

The government could consider implementing the following changes:

• Pay: aligning paternity pay with maternity pay for the first 6 weeks (set at 90% of earnings).
• Leave: increasing the duration of parental leave for both parents.
• Gender equity: encouraging fathers to engage from day one of parenting.
• Shared parental leave: making shared parental leave less complex and more user-friendly for parents or employers.

What does this mean for employers?

Encouragingly, the government has stated that any reforms will aim to simplify the system for both parents and businesses, without placing additional burdens on employers. However, potential changes to funding mechanisms could shift the financial burden onto employers, which may have implications particularly for smaller organisations.

For now, no immediate changes are required, but employers may wish to begin reviewing their existing parental leave policies, especially where they offer enhanced benefits, in anticipation of future reforms.

What does this mean for employees?

If the government acts on the recommendations, new parents may benefit from longer periods of leave, increased statutory pay, and a more inclusive system that supports diverse family structures, including self-employed workers and low-income households.

Simplification of the current system could also make it easier to understand and access leave entitlements, helping more parents, particularly fathers, to take time off without financial penalty. While changes are still a way off, employees should stay informed and speak with their employers about their rights and options under the current framework.

Employment law experts

Lodders’ employment solicitors offer accurate, no-nonsense HR and legal advice to a wide range of clients who require “hands-on” and strategic assistance with the complexities of employment law.

We will continue to monitor developments and keep you updated as the review progresses. In the meantime, if you have any questions about your organisation’s parental leave obligations or wish to explore policy improvements, please get in touch with our employment law team.