Written evidence from the Joseph Rowntree Foundation [SPL0049]

The Joseph Rowntree Foundation (JRF) is an independent social change organisation, working to support and speed up the transition to a more equitable and just future, free from poverty, where people and planet can flourish. For more information about our work please see www.jrf.org.uk.

Summary

• Introducing a more generous entitlement to paternity leave will deliver for families, equality and economic growth. New modelling from the Centre for Progressive Policy (CPP) on behalf of JRF shows that extending Statutory Paternity Leave to six weeks at 90% of average earnings (capped) could deliver £2.68 billion to the wider economy. These gains are driven by more mothers entering the workforce and working more hours as better paternity leave means a rebalancing of how couples share care.
• The UK needs a reformed system which will support fathers and co-parents[i] to share care of their children more equally, improve female labour market outcomes to raise household incomes and provide support for low income fathers so they can better afford to take time off in their baby’s first year. Crucially, this should not come at the expense of existing maternity rights. In fact, this transformation requires improvements to both the maternity and paternity support.
• Reforming paternity leave also needs to focus on policy change to increase the number of fathers eligible as well as making support more generous. Financial support needs to be introduced for self-employed fathers/partners to take paid leave, and fathers need a day one right to Statutory Paternity Pay as well as the new day one right to take Statutory Paternity Leave.
• Employers need to be involved in the development of paternity leave reform. We can learn a lot from the voluntary practice of employers already offering enhanced paternity leave. However, the Government needs to provide an enhanced statutory entitlement to ensure that fathers aren’t missing out.

Introduction

We are pleased to submit evidence to this timely enquiry and agree with the Committee’s assertion that unequal division of childcaring responsibilities is a key driver of wider gender inequality and the gender pay gap. JRF’s research on the Caring Penalty finds that unpaid primary child-care givers, generally mothers, experience an average pay penalty of £1,263 per month (over £15,000 per year) reaching £1,785 per month (over £21,000 per year) after six years of providing unpaid care.[ii] By the end of the sixth year, unpaid child-care givers will have foregone a cumulative total of more than £100,000 in gross pay on average. The caring penalty falls disproportionately on women and households in poverty. Tackling the caring penalty requires a radical redesign of work and the role of care within it, and reform of parental leave must form part of this redesign.

Alongside a maternity leave offer which genuinely supports mothers, we think the Government’s energy should be placed on reforming statutory paternity leave via a more generous ‘use it or lose it’ entitlement for fathers/partners. In this submission, we have answered a subset of the questions in the terms of reference, providing a short commentary on the low uptake of shared parental leave, and then a more substantive section on our proposals for a new system of paternity leave including the costs and benefits of improving entitlements.

Section 1 - Shared Parental Leave

There is robust evidence on the limited impact of the current system of Shared Parental Leave in the UK. The Department for Business and Trade (DBT) published a thorough evaluation of the Statutory Parental Leave (SPL), and Statutory Shared Parental Pay scheme in 2023.[iii] They report that very few parents take up the scheme - only 5% of employee fathers and 1% of employee mothers. They conclude that parents who take up SPL are more likely to be older, of white ethnicity, highly qualified, work in large organisations and earn a higher income compared to parents who do not take up SPL, meaning some of the most marginalised in the labour market do not benefit.

Whilst there is some scope for encouraging more parents to take up the scheme as it is currently designed, we believe there are flaws baked into the current design which mean it is not an attractive offer and thus pose limitations for boosting take up. First, Shared Parental Pay is essentially Statutory Maternity Pay transferred to the mother’s partner. Mothers forego some of their entitlement rather than there being a genuinely shared pot of leave and pay. Additionally, the current design of SPL assumes couples are both in secure work, not self-employed, and that one or both parents are on a high enough income to withstand the financial shock of taking very low-paid leave.

Shared Parental Pay is very low, at £184.03 per week. This is less than 50% of the National Living Wage for a full time working week. As fathers are likely to earn more, it often does not make financial sense for a mother to return to work and a father to take leave. Mothers will also require time in that first year to recover from birth, and need protected time to breastfeed if they choose.[iv] So, despite the value that families who take it up can gain from it, the design fundamentally limits its impact and as a result uptake is so low that it cannot achieve the societal shift we seek in the sharing of care.

Section 2 - Reforming statutory paternity leave and pay

Terms of reference addressed:

• Are there potentially more effective alternatives to the current “maternal transfer” model of shared parental leave?
• Which countries have most effectively incentivised equal parenting and wider gender equality through their approaches to parental leave? What would be the costs and benefits of replicating these approaches in the UK?

JRF has been undertaking policy analysis and commissioning modelling to explore potential policy settlements for the future of the paternity leave and pay system. Central to this work is new economic modelling of the costs and benefits for different policy options for improvements to paternity leave. Carried out by the Centre for Progressive Policy, it has found extending Statutory Paternity Leave to 6 weeks at 90% of average earnings (capped) could deliver £2.68 billion to the wider economy in the medium term. This has largely been missing from the policy discussion on parental leave in the UK which has focused primarily on cost. Alongside this new analysis, we are speaking to employers and business organisations to understand better employers’ response to making paternity leave more generous.

(a)    The introduction of better paternity leave entitlements has been linked to improved female labour market attachment.

There is good evidence which links taking more paternity leave with a more egalitarian sharing of childcare responsibilities within in a household. In turn, women’s labour market participation improves when childcare and household tasks are shared between couples.[v] [vi] A number of studies look at the impact of paternity leave policies across different groups of countries and have used regression analysis to establish causation on resulting increased female labour market participation.[vii]

International case studies

Quebec, Canada

A non-transferable paternity leave policy was introduced in Quebec, Canada in 2006. This policy has also been associated with an increase of solo parenting time by fathers and take up of leave. [viii] This involved the introduction of 5 weeks of leave reserved for fathers which could not be transferred to mothers. Previously fathers only had access to the national shared parental leave scheme, which had no ring-fenced quota for fathers. It also forms a natural experiment as researchers can compare outcomes in Quebec with other Canadian states.[ix] Dunatchik and Ozcan (2019)[x] found that Quebec mothers living in households exposed to the policy are more likely to participate in the labour force.[xi]

Spain

Spain is a leader in gender-equal parental leave with both parents entitled to 16 weeks of fully paid parental leave. This reform has been achieved through successive increases in the length of paternity leave from 2017 to match maternity leave in 2021. The first 6 weeks of paternity are mandatory and then the remaining 10 weeks can now be taken continuously or split into blocks making solo parenting by fathers easier.[xii]

(b)   Statutory paternity pay in the UK is too low and the leave too short 

The UK has the least generous statutory paternity leave entitlement in Europe.[xiii] Fathers are entitled to only 2 weeks paternity leave at £184.03 a week or 90% average weekly earnings (whichever is lower). As a comparison, this is around 46% of the National Living Wage (NLW) for a 35 hour working week[xiv] and represents a very weak income replacement measure. In fact, around 70% of fathers that did not take their full paternity leave entitlement had to cut it short due to cost.[xv]

Additionally, all types of statutory parental pay are uprated in April each year using September’s Consumer Price Index (CPI) the previous year,[xvi] whereas the Low Pay Commission use a different methodology to make recommendations on the NLW which results in a higher uplift.[xvii] This means the gap between all statutory parental pay rates and the National Living Wage is widening.

A comparison of Statutory Paternity Pay with the National Living Wage

Finally, lower income households are more likely to be in insecure work, meaning they are less likely to qualify for paternity pay, less resilient to the income shock at the current rate and less likely to work in roles with enhanced parental leave. Only 14% of households with a household income under £25,000 take a more generous form of paternity leave from their employer compared to 35% where household income is over £80,000.[xix] 

(c)    Building a new parental leave system

Our proposition for a reformed paternity leave system draws on evidence from the academic literature, conversations with policy experts from the employment rights and women’s sector, and through working with grassroots organisations like the Dad Shift.[xx] We think a new system needs to offer income replacement generous enough to maximise uptake and time off with their baby, in order to promote more equal responsibility for care. It needs to see fathers not losing out just because of the particular employer they work for or employment status. And finally, it should ensure that mothers should not lose out on any of their existing rights, which in fact should be strengthened.

Evidence from other countries shows that at least a ‘use it or lose it’ allowance of  6 weeks or more of paid paternity leave is associated with reduced gender inequality in the labour market – 3 times more than the current 2 weeks in the UK.[xxi] Alongside JRF, a number of campaigning and parent rights organisations also support the policy of 6 weeks of non-transferable paternity leave at a replacement rate nearer to full salary but capped for the highest earners. Aligning a more generous paternity leave entitlement with the current first 6-week maternity leave entitlement is also a pragmatic option – employers and parents are already familiar with accommodating this entitlement.

Additionally, we think there should be flexibility in how fathers can take these 6 weeks of leave, splitting it up into blocks or even individual days which suit their family. This will encourage some fathers to take some leave whilst their partner has returned to work leading to solo parenting by fathers. Recent changes to paternity leave entitlements - allowing fathers to take two non-consecutive weeks of paid leave - already establish a precedent for flexibility. DBT argue that even introducing this minor change in flexibility will encourage greater paternal involvement including solo parenting and the evidence suggests that there will be an economic return via mothers’ labour market participation[xxii] though the impact on employers will need to be explored.

(d)   Modelling the cost and benefits of different statutory paternity leave options

JRF commissioned the Centre for Progressive Policy (CPP) to model the costs and benefits of a number of different statutory paternity leave options. This has largely been missing from the policy discourse on parental leave. This work is forthcoming (spring 2025), but we share the results here pre-publication.[xxiii]

The novel model was built to help policymakers understand the labour market effects – and associated economic and tax costs - of varying paternity leave terms in the UK. The model draws on observed behavioural responses in the UK and other OECD countries. These estimates of behavioural responses to paternity leave were drawn from peer reviewed academic publications. The model enables scenario testing by adjusting 5 key parameters:

1. Duration of Leave: This is the length of time fathers are allowed to take paternity leave. The model explores scenarios ranging from 2 to 26 weeks.
2. Wage Replacement Rate: This determines the percentage of a father's wages that are compensated during the leave. The model evaluates reforms from 30% to 100%
3. Share of the Cost by the Government: This represents the proportion of leave benefits financed by the government versus employers. The model assesses the impact when the government fully covers costs versus when employers bear them.
4. Substitution Rate for Production: This measures the extent to which lost labour from fathers on leave can be replaced. A higher substitution rate means firms can more easily find cover for absent workers, reducing economic losses.
5. Cap Amount for Leave Benefits: This sets a maximum limit on the benefits fathers can receive while on leave, which could help control costs. The model explores different cap levels to assess their impact on both worker participation and overall fiscal sustainability.

The model assumes the costs and benefits once it is fully operational and has had an impact on the female labour market - this means there is an upfront cost before the economic returns are felt. Where other countries have introduced improved paternity leave offers, female labour market effects typically begin to emerge within approximately 2 years, so it is reasonable to assume of a lag of 2 to 3 years to see an impact which we think is a relatively short window. Families who are eligible will feel the effects more quickly at a household level.

Results are generated for the economy-wide costs and benefits and for HM Treasury. The economy-wide model captures broader impacts to the economy, such as higher economic output and productivity gains resulting from increased female workforce participation, whereas the HMRC/Treasury model focuses only on direct fiscal costs and revenues for the government, such as increased tax revenue due to more women working. The model makes conservative assumptions based on labour market factors alone so it is likely that even greater benefits could be achieved when changes such as health outcomes were also included. The economic benefits attributed in the model are driven by improvements to female labour market participation as evidenced above.

Modelling results for 6 weeks at 90% pay (with a cap of £1,200 a week: income replacement costs reimbursed fully by government) (Centre for Progressive Policy for JRF (2025)).
 

These modelling estimates (generated from the model described above) for the economy-wide effects and the effect for HM Treasury are set out in the chart above which gives the breakdown in the different components for the costs and benefits.

The main cost to HMRC in the model is the direct cost of reimbursing employers for Statutory Paternity Pay. The model estimates these costs at £1.15 billion for 6 weeks at 90% but a net cost, taking into account the economic benefits (the direct gains to HMRC resulting from higher female employment), of £220 million. The main economy-wide cost is the impact of male employment output loss as fathers spend time away from work, which is estimated at around £2.8 billion. The main economy-wide gain is driven by female employment output gains of £5.5billion. Therefore, the modelling shows a net positive economy-wide effect of £2.68 billion. We think it is reasonable to assume these returns will happen after 2 to 3 years. This result reflects the international literature on the impact of more generous paternity leave entitlements which trigger increased labour participation by women.

To harness these growth benefits, we propose a paternity leave policy design which:

• Focuses financial support in the first 5-6 weeks of leave: the modelling found that the most notable growth impacts came when the policy was designed as a 5-6 week offer at a 90% replacement of income. While there are additional benefits if this policy is extended, these tend to be outweighed by the costs. 
• Includes support for self-employed fathers: the scale of benefits is partly down to a labour market-wide coverage of the end policy, where support is given to self-employed as well as employed fathers, who currently have no access to financial support. This could come by creating a new benefit akin to Maternity Allowance – a  ‘Paternity Allowance’, for example.
• Includes a cap on fathers’ salaries: this model assumes a salary cap of £1,200 a week which is approximately an annual salary of £62,400 (before tax). This is because the highest earning fathers should be able to withstand the temporary salary reduction and are more likely to have access to enhanced paternity pay. This will make the policy more affordable and fairer to the taxpayer. We do not propose introducing a cap for this phase of statutory maternity pay because it would weaken existing entitlements for mothers.
• Is Government-funded: we think it’s important that Government funds the cost of this policy to reduce the likelihood of perverse consequences in the case of an employer-funded offer, such as fathers experiencing discrimination. The economic-wide result is maximised where government bears all the costs of the policy as the tax distortion effect is lower than the business employment distortion effect.

(e)   Increasing the number of fathers entitled to paternity pay

Reforming paternity leave also needs to focus on policy change to increase the number of fathers eligible as well as making support more generous.

Currently self-employed fathers are not entitled to any paternity leave or pay– our research shows that addressing this gap could not only provide tangible support to many households but offer real benefits to the Exchequer. There is no equivalent system to Maternity Allowance for self-employed fathers, and this should be addressed.

New fathers also need a day one right to statutory paternity pay as well as leave. A new day one right to paternity leave will be introduced via the Employment Rights Bill partially ending the unfairness for fathers that have recently started a new job. DBT have estimated that this change will mean that around 32,000 additional fathers will be entitled to paternity leave.[xxiv] However, these fathers are still not entitled to statutory paternity pay meaning they will need to take this leave unpaid or not take leave at all. They are missing out on financial support just because they happened to move into work or move jobs whilst their partner was expecting their baby. Beyond the hardship experienced by families in these situations, job moves are linked to increasing household incomes and we need to ensure there are no disincentives in parental leave policy to make those beneficial job moves.

(f)     Understanding the views of employers

As part of our policy work on paternity leave, we are speaking to employers themselves and business umbrella bodies about the implications for extending statutory paternity leave. Employment regulation reform is best done working alongside employers who will need to implement the changes and know what works well in their business settings. However, the Government needs to show leadership to make the moral and economic case and legislate for change as too many families will lose out if parental leave policy is left purely to voluntary behaviour by employers.

The Chartered Institute of Professional Development (CIPD), which represents the HR profession, has undertaken detailed surveys with employers on their parental leave offers and finds that almost half of employers supported extending statutory paternity leave and pay.[xxv] A growing group of employers voluntarily offer enhanced paternity leave as part of their parental leave policies. Enhanced parental leave is viewed as part of the overall employee benefit package alongside things like annual leave, flexible working and discount schemes. A number of businesses have gone further to offer fully paid equal parental leave.[xxvi] There is a lot to be learnt from this voluntary practice on how employers can manage colleagues taking time off - for example, paternity leave can give the opportunity for employers to offer temporary development opportunities to other staff to aid career progression.

However, small and micro businesses have argued that new regulation and staff absence can be more challenging as they have less HR capacity and find covering staff absence more disruptive. DBT, in their impact assessments for the two recent changes to statutory paternity leave policy (increased flexibility and the new day one right to leave), make the case that small and micro businesses should not be exempt for improved paternity policy to be effective. Engaging with businesses to design any changes to the paternity leave system will be important, as will making available support and advice to help smaller businesses to deliver the offer effectively. Government should also consider how the new Fair Work Agency could enforce these new paternity rights.

An enhanced statutory entitlement will mean that whether families get good support or not is no longer down to individual employer policies as too many families, particularly those in lower paid work, will miss out

Conclusion

There is no more tweaking to be done to the current system of paternity leave, so any reform needs to involve public investment to make both the rate of paternity pay and the length of leave more generous. JRF’s research shows that this will mean gains for both families and the economy and contribute to addressing the gender inequalities which are estimated to cost the UK around £95 billion.[xxvii]

Introducing a new system of more generous paternity leave, rather than relying on the current maternal transfer mechanism of shared parental leave will be more transformative at shifting gender norms on sharing care simply because more fathers will be able to take it up. We think this is where policy development and additional public investment should be focussed. The current Shared Parental Leave system should remain for the small group of parents who are keen to use it and to continue to provide choice for families.

For further information

This submission was prepared by Louise Woodruff, Senior Policy Adviser at JRF louise.woodruff@jrf.org.uk. For more information on the content of this submission and our wider programme on families, work and care please do get in touch.

Notes and references