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EMPLOYMENT BILL

EXPLANATORY AND FINANCIAL MEMORANDUM

INTRODUCTION
  1. This Explanatory and Financial Memorandum relates to the Employment Bill. It has been prepared by the Department for Employment and Learning (DEL) in order to assist the reader of the Bill and to help inform debate on it. The Memorandum does not form part of the Bill and has not been endorsed by the Assembly.
  2. The Memorandum needs to be read in conjunction with the Bill. It is not, and is not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any particular explanation or comment, none is given.
BACKGROUND AND POLICY OBJECTIVES
  1. Consideration of new rights for working parents was initiated by the publication in December 2000 by the Department of Trade and Industry (DTI) of a Green Paper Work and Parents: Competitiveness and Choice. The paper was designed to stimulate debate on a number of options to meet the needs of working parents and their employers. The Department for Employment and Learning issued the Green Paper in Northern Ireland for public comment. Following the Green Paper consultation, DTI devised and consulted on new options for leave and pay in relation to maternity, paternity and adoption: similar consultations took place in Northern Ireland (NI). DTI also commissioned a high-level taskforce to consider the introduction of flexible working arrangements for parents of young children. The proposals which emerged from these exercises are now included among the provisions of the Employment Bill currently before Parliament at Westminster. The Bill provides for the provisions to be implemented by regulations made under the affirmative resolution procedure. These are intended to come into force in GB on 6th April 2003.
  2. Retention of working parents in the labour market is a key element in the strategy to meet the skills needs of NI. The proposals outlined at paragraph 5 below are also in line with the Department for Employment and Learning's commitment to the Work/Life Balance agenda. The extensive consultation process in NI, outlined at paragraphs 7, 8 and 9, confirmed that there was support for the introduction of additional measures to facilitate balance between family and work commitments. It is therefore proposed to introduce, by way of an Assembly Employment Bill, rights for working parents in NI to match those that will be available under the Employment Bill in GB. Social security provisions in the GB Bill are being taken forward in NI by the Department for Social Development by means of a NI Social Security Bill.
  3. Specifically, the NI Employment Bill will for the first time provide rights for fathers and adoptive parents to paid time off and will simplify existing provisions on maternity rights. In particular, it will introduce:
    • The right to two weeks paid paternity leave around the time of the birth of a child or around the time a child is newly-placed for adoption. Leave must be taken in one block within the first eight weeks of the child's birth or placement. Statutory Paternity Pay (SPP) will be at the same standard rate as Statutory Maternity Pay (SMP).
    • Adoption leave for parents adopting a child newly placed with them. As far as practical, provisions for adoption leave will mirror provisions for maternity leave. Adoption leave will be for the same length of time as maternity leave. Statutory Adoption Pay (SAP) will be for the same period of time as SMP and paid at the same standard rate.
    • Amendments to existing legislation to improve maternity rights - in particular the right to 26 weeks ordinary maternity leave (paid) and 26 weeks additional maternity leave (unpaid) to expectant mothers.
    • A duty on employers to consider seriously requests from parents of young children to work flexible hours.
  4. As in GB, these provisions would be implemented by affirmative resolution regulations made under the Bill. It will be appropriate for these to come into force on 6th April 2003, simultaneously with GB, both because NI employees should have these rights at the same time as employees in GB and because administration of statutory pay is by means of the UK-wide Inland Revenue system.
CONSULTATION
  1. All of the proposals outlined above have been the subject of full public consultation, in line with the guidelines set out in the Departmental Equality Scheme.
  2. The proposals found favour across the board. There was unanimous support for the introduction of paid adoption leave. The proposals on paid paternity leave and the extension of maternity leave were well received, although employers were concerned that these should be implemented in a manner sympathetic to business. In this context, efforts to ensure a 'light touch' as regards the proposals and to harmonise elements surrounding leave and pay were particularly welcomed.
  3. . The majority of respondents agreed with the proposal to legislate to give parents of young children the right to request flexible working conditions.
OPTIONS CONSIDERED
  1. As part of the initial consultation on work and parents issues, respondents were asked to prioritise a wide range of measures to support working parents. These included, for example, giving parents the right to opt to work reduced hours for as long as they wish at the end of maternity leave, and payment of maternity pay directly to mothers, instead of through their employer. The outcome of the consultation informed the Department's choice of a number of key priority actions, which would best meet the needs of working parents and their employers. These are reflected in the provisions of the Employment Bill.
OVERVIEW
  1. The main areas covered by the Bill are paternity and adoption leave and pay, maternity leave and flexible working.
  2. In many instances the Bill amends or inserts provision into NI legislation. Specifically amendments are made to:
    • the Social Security Contributions and Benefits (NI) Act 1992;
    • the Social Security Administration (NI) Act 1992; and
    • the Employment Rights (NI) Order 1996.
  3. The Bill has 18 clauses and 2 Schedules.
COMMENTARY ON CLAUSES

Clause 1: Adoption leave
Clause 1 makes provision for a new statutory right to ordinary adoption leave and additional adoption leave for an adoptive parent around the time of placement of a child for adoption. Regulations will determine the entitlement to and details of the leave. It is intended that adoption leave will be available whether the child is being adopted within the UK or from abroad. For practical reasons, there will be slight differences to some elements of the provisions for domestic adoptions and adoptions from abroad. It is intended that ordinary adoption leave will be for a period of up to 26 weeks and additional adoption leave will be for a further period of up to 26 weeks, giving a total of up to one year's leave.

The legislation is framed in a similar way to provisions in the Employment Rights (NI) Order 1996 (ERO) in relation to maternity leave, and the clauses will be inserted into the ERO.

Regulations will be made making adoption leave available:

In cases where a married couple adopts a child, it is planned that only one spouse will be entitled to take the leave. The other spouse will be entitled to two weeks' paternity leave if the qualifying requirements in respect of such leave are met.

Regulations will provide that adoption leave will apply only where the child is newly placed with an adoptive parent - it will not apply to step-family adoptions or adoptions by a child's existing foster carers.

Regulations will also provide that adoption leave will only be available to an employee who has completed a period of qualifying service. It is intended that the requirement will be continuous service with the same employer for at least 26 weeks by the week in which an approved match with the child is made (a match occurs when an approved adoption agency matches an adopter with a child).

An employee will have the right to return to a job following a period of adoption leave. It is intended that regulations will allow for:

Clause 2: Paternity leave
Clause 2 establishes provision for the introduction of a new statutory right to two weeks' paternity leave. Regulations will provide for this to be taken in a single block of either one week or two weeks at the choice of the father. The intention is to make paternity leave available to fathers following the birth of a child or the placement of a child for adoption. The requirement for paternity leave will be set out in the regulations.

Clause 2 is similar in construction to the provisions in the ERO in relation to parental leave, and it will be inserted into the ERO.

Regulations will be made making paternity leave available:

As it is intended that adoption leave will only be available to one spouse in cases where a married couple adopts a child, paternity leave will be available to the other spouse. For practical reasons there will be slight differences in how paternity leave operates between those adopting within NI and GB and those adopting abroad. Provision for adoptions outside the UK will be made in regulations.

Paternity leave will be available only to an employee who has completed a period of qualifying service. It is intended that the requirement will be continuous service with the same employer for at least 26 weeks by the fifteenth week before the child is expected to be born, or in the case of adoption by the week in which an approved match with the child is made.

An employee will have the right to return to a job following a period of paternity leave. It is intended that regulations will allow for:

Clause 3: Statutory paternity pay
Clause 3 establishes a new statutory right to SPP for fathers following the birth of a child or the placement of a child for adoption. It provides for SPP to be paid for a period of one week or two weeks, or two periods of one week. Regulations will provide for the father to choose to be paid for a single period of one week or two weeks. SPP will generally be payable for paternity leave taken within 56 days of the date on which the child is born or placed for adoption.

The rate of SPP will be set in regulations. In 2003 it will be the lesser of £100 per week or 90% of the employee's average weekly earnings.

SPP will be available to an employee who has met the service qualification (continuous service with the same employer for at least 26 weeks by the fifteenth week before the child is expected to be born or by the week in which an approved match is made with the child), has a relationship (to be specified in regulations) with the child and the mother or adoptive parent, has given appropriate notification and whose average weekly earnings are equal to or above the Lower Earnings Limit (LEL) applying to National Insurance Contributions (NICs) (£72 per week from April 2001). For practical reasons there will be slight differences in how paternity pay operates between those adopting within the UK and those adopting outside the UK. Provision for adoptions outside the UK will be made in regulations.

SPP will be administered by employers in the same way as SMP. Employers will be able to recover a percentage of the amount of SPP they pay out, (limited in most cases to 92%), with small employers who are entitled to Small Employers' Relief (in 2002/3, those with NICs due in a year of £40,000 or less) able to claim 100% and an added payment (in 2001/2 of 5% for SMP) to compensate for employers' share of NICs payable in respect of SPP. Clause 6 provides for a power to make regulations to enable employers to ask for funding, if necessary in advance, from the Inland Revenue where the amount of SPP they have to pay their employees exceeds the tax and NICs that they are due to pay to the Inland Revenue. In certain circumstances where an employer fails to pay SPP, the Inland Revenue will become responsible for the payment. Liability will also fall on the Inland Revenue from the first week in which an employer becomes insolvent.

The framework for SPP is similar to that already in place for SMP and Working Families' Tax Credit. The distribution of rights and obligations as between primary and secondary legislation follows the model of the Social Security Contributions and Benefits (NI) Act 1992 and Tax Credits Act 1999. As under those Acts, administrative and enforcement powers are conferred on the Inland Revenue.

Clause 4: Statutory adoption pay
Clause 4 establishes a new statutory right to SAP for adoptive parents around the placement of a child for adoption. SAP will be available to an adoptive parent of a child newly placed for adoption - it will not apply to step-family adoptions or adoption by a child's existing foster carers - whether the child is being adopted within the UK or from abroad. For practical reasons, there are slight differences to some elements of the provisions for domestic and adoptions abroad. Regulations will set out how SAP will apply to adoptions abroad.

Clause 4 states that SAP will be available for a period of up to 26 weeks. The rate of SAP will be set in regulations. In 2003 it will be the lesser of £100 per week or 90% of the employee's average weekly earnings.

SAP will be available to an employee who has met the service qualification (continuous service with the same employer for at least 26 weeks by the week in which an approved match with the child is made), has an approved match with a child, has given appropriate notification, and whose average weekly earnings are equal to or above the lower earnings limit applying to NICs (LEL is currently £72 a week - £75 from 6 April 2002).

SAP will be administered by employers in the same way as SMP. Employers will be able to recover a percentage of the amount of SAP they pay out, (limited in most cases to 92%), with small employers who are entitled to Small Employers' Relief (in 2002/3, those with NICs due in a year of £40,000 or less) able to claim 100% and an added payment (in 2001/2 of 5% for SMP) to compensate for employers' share of NICs payable in respect of SAP. Clause 7 provides for a power to make regulations to enable employers to ask for funding, if necessary in advance, from the Inland Revenue where the amount of SAP they have to pay their employees exceeds the tax and NICs that they are due to pay to the Inland Revenue. In certain circumstances, where an employer fails to pay SAP, the Inland Revenue will become responsible for the payment. Liability will also fall on the Inland Revenue from the first week in which an employer becomes insolvent.

Clause 5: Financial arrangements
Clause 5 makes provision for payment by way of sums payable by employers in respect of statutory sick pay, statutory maternity pay, statutory paternity pay and statutory adoption pay to be set off against sums payable to the Inland Revenue.

Clause 6: Funding of employers' liabilities
Clause 6 is an enabling clause allowing the Department to make regulations, which provide for the Board of the Inland Revenue ("the Board") to fund payment by employers of statutory paternity pay and statutory adoption pay.

Clause 7: Regulations about payment
Clause 7 is an enabling clause allowing the Department to make regulations setting out how employers should keep records and produce various documents for inspection by officers of the Board.

Clause 8: Decisions and appeals
Clause 8 provides for officers of the Board to be responsible for matters listed therein, and for mechanisms for decisions and appeals.

Clause 9: Power to require information
Clause 9 is an enabling clause allowing the Department to make Regulations for the purposes of an officer of the Board of the Inland Revenue requiring persons to produce various documents relating to statutory paternity pay and statutory adoption pay.

Clause 10: Penalties: failure to comply
Clause 10 sets out penalties that apply in cases of failure to provide documentary material on request. Further details are contained in Schedule 1 of the Bill.

Clause 11: Penalties: fraud, etc.
Clause 11 establishes that where a person fraudulently or negligently makes an incorrect statement regarding entitlement to statutory paternity pay or statutory adoption pay, a penalty may be applied. Further details are contained in Schedule 1 of the Bill.

Clause 12: Rights during and after maternity leave
Clause 12 amends the Employment Rights (NI) Order 1996 in relation to maternity leave and provides for the Department to make Regulations setting out rights applying on persons returning to work in certain circumstances.

Clause 13: Flexible working
Clause 13 gives parents the right to apply for flexible working. It lays out:

The new provisions will be inserted into the Employment Rights (NI) Order 1996.

Clause 14: Regulations
Clause 14 states that Regulations under this Bill may contain such amendments as the Department considers necessary or appropriate.

Clause 15: Amendments and revocation
Clause 15 (Subsection 1) brings Schedule 2, which makes amendments to the Social Security Contributions and Benefits (NI) Act 1992, the Social Security Administration (NI) Act 1992, and the Employment Rights (NI) Order 1996 into effect.

Clause 15 (Subsection 2) states that the substitution of "Inland Revenue" for "Department" in Schedule 1 Paragraph 32 of the Social Security Contributions (Transfer of Functions, etc) (NI) Order 1999 is revoked.

Clause 16: Commencement
Clause 16 gives the Department power to bring the provisions of the Bill into operation by commencement orders.

Clause 17: Interpretation
Clause 17 provides for the interpretation of terms used in the Bill.

Clause 18: Short title
Clause 18 cites the title of the Act. This is the title by which the Act will be known.

FINANCIAL EFFECTS OF THE BILL
  1. As is currently the case with maternity pay, paternity and adoption pay will largely be funded through the Inland Revenue. As for other employers, implementation of the Bill's proposals will entail marginal costs for the public sector but the Department of Finance and Personnel would expect these to be met from within existing resources. Financial implications for employers are discussed in more detail at paragraphs 18 and 19.
EFFECTS ON EQUAL OPPORTUNITY
  1. The Bill will not unlawfully, unfairly, or unjustifiably discriminate, directly or indirectly, against specified sections of the community. The policies are intended to increase equality of opportunity, in that they enable employees with young children to compete more fairly for employment and career development.
HUMAN RIGHTS ISSUES
  1. The provisions of the Bill are considered to be compatible with the terms of the Human Rights Act 1998.
EQUALITY IMPACT ASSESSMENT
  1. Full Equality Impact Assessments carried out in respect of all provisions of the Bill concluded that the Bill would have a positive impact on those equality categories likely to be affected. Although no adverse impacts were identified, the assessments highlighted the need to ensure that employers implement the proposals in a manner which is fair to all employees.
SUMMARY OF THE REGULATORY APPRAISAL
  1. A full Regulatory Impact Assessment (RIA) was carried out on the maternity, paternity and adoption aspects of the proposed Bill. The total impact on employers in Northern Ireland is estimated at between £1.6m and £3.8m recurring annual costs (at 2003/4 prices), with additional start up costs of £200,000 to £800,000. The cost of the proposals to the private sector in Northern Ireland, which accounts for around 60% of employment, is thus £1m to £2m a year.
  2. In respect of the Flexible Working proposals, the full RIA indicates costs in year one for employers of between £10.4m, or £867 per request on average, and £29.6m, or £822 per request on average. In subsequent years recurring costs are estimated as being between £2.61m, or £870 per request on average, and £7.39m, or £821 per request on average. These estimated costs are based on low and high take-up scenarios respectively. The low scenario assumes uptake of the scheme by 10% of those eligible, while the high scenario is based on uptake by 30%. These costs will be offset by an estimated annual reduction of £2.45m in recruitment costs due to a predicted increase in the number of mothers returning to work after pregnancy.
SECRETARY OF STATE'S CONSENT
  1. The Secretary of State has consented under section 10(3)(b) of the Northern Ireland Act 1998 to the Assembly considering this Bill.
LEGISLATIVE COMPETENCE
  1. At Introduction the Minister for Employment and Learning had made the following statement under section 9 of the Northern Ireland Act 1998:
    "In my view the Employment Bill would be within the legislative competence of the Northern Ireland Assembly."