Network News

Home News Network News Parental leave: who pays for it?

Who to contact

Have a question?

Network News • 28-07-2022

Parental leave: who pays for it?

Author: Dr Lina Klesper - Legal Assistant PKF Malta
Published on Business Today: 28th July 2022

Directive (EU) 2019/1158 of the European Parliament and of the Council of 20 June 2019 on work-life balance for parents and carers, known as the EU´s Work-Life Balance Directive, was set on August 1st, 2019, with three years to implement.  Its aim is to grant EU citizens several minimum rights for a work-life balance, promote equality and equal opportunities and further strengthen the rights of women and men in the European Union.  With the implementation of the directive in all Member States, parental rights of both parents, specifically, the fathers in terms of paternity and parental leave shall be acknowledged eventually leading to a positive influence on the gender care gap.

Making countries more family-friendly is a surprisingly crucial goal when it comes to how profitable and successful a company is. According to a global study by E&Y and the Peterson Institute for International Economics, a correlation between the proportion of women in leadership and the amount of paternity leave days was discovered.  In countries with the highest percentage of women in leadership positions, fathers are granted 11 times more paternity leave days. It goes that women are more likely to obtain top positions in family-friendly countries with more support for parents and childbirth. Most interestingly, the more women there are in the executive suite, the more profitable the company will be.

With the EU´s Work-Life Balance directive´s implementing deadline approaching, its transposition is currently taking form in Malta. The Maltese Government is implementing the directive on 1st August 2022, on the last possible day granting Maltese citizens the minimum entitlements as set in the directive. Parents will receive two months of paid leave at the national parental leave rate and two months of unpaid leave transferable from one parent to another. Fathers will receive 10 days of paid leave on the birth of their child as opposed to currently one single day of leave. Even though Malta only opted for the minimum entitlements – welcomed by the Malta Employer´s Association – it can be titled an unprecedented reform to the benefit of Maltese and Gozitan families.

As for the funding of the new entitlements for parents and families, the Government will finance all measures until 2023 with the private sector expected to take over the responsibility to finance the measures from 1 January 2024. Employers complain that in Malta employers will have to bear the costs. The Malta Employer´s Association sees that the employers will not only have to pay for the direct benefit but will also have to deal with the disruption and expenses incurred in replacing absent employees leaving them with a heavy burden.

There are in general three typical financing models: Paid parental leave can be funded by government-mandated social insurance or security institutions, by employer liability, or by a combination of both.  The EU directive in this case leaves it to the Member States to decide how the measures are to be funded. In many EU Member States, however, such social benefits are paid for by the government.

For government funding speaks that privately funded paternal leave could worsen the statistical discrimination against women because after all fathers are still less likely to take parental leave. Furthermore, the costs could be a huge burden to smaller businesses.  Publicly funded parental leave has clear benefits, especially for gender equality. Nevertheless, it is very expensive to fund those measures which could lead to the question if this is the most cost-effective use of funds.

    During the implementation period of the EU´s Work-Life Balance Directive we saw Member States changing their laws opting for minimum entitlement as well as taking a chance to further expand existing rights since many Member States were already compliant with the directive.

In Germany, unpaid parental leave can be taken up to three years and can be split between parents. During that time no salary is received from the employer but there is the possibility to apply for parental allowance which is state-funded financial support. As a reaction to the EU directive, Germany will implement the ten-day paid leave for the second parent around the birth of the child. This will be implemented by the legislator as part of a separate legislative project before the end of 2022.

In January 2021, Spain extended its paternity leave to a total of 16 weeks making the paid time off for fathers equal to paid maternity leave declaring Spain a leader in terms of paid paternity leave in Europe. Funding for these measures is provided by the Spanish government, not the employer, though employers are liable for certain taxes that pertain to the salary.

However, Sweden can still be seen as the number one for parental leave since the maternity leave is much longer and the total leave time available to both parents is cumulatively more. In Sweden, the costs of the parental leave benefit are also paid by the government.

In July 2021, France finalized a decision to extend paternity leave. New fathers will now benefit from 25 calendar days or 28 days in total including the three-day childbirth leave. Paternity leave in France is covered by the French social security system.

Italy increased the mandatory government-paid paternity leave from seven working days to 10 working days in January 2021. Paternity leave is paid at 100% of the salary by the Italian government. One parent or both parents have the option to take up to 11 months of parental leave from work. However, the parental leave allowance is significantly less than the maternity leave allowance making up only 30% of the usual wage.

Having taken a glimpse at how different EU Member States handle parental support, it seems that it is indeed most common that the government is responsible for funding measures to support families. Considering the importance of family-friendly structures, the costs to fund measures of support should not be seen as a burden but more as an investment in the future to the benefit of families, companies and the state.

This can surely be used as an argument for both, the employer´s and the government´s side to bear the costs. In the case of Malta, it eventually comes down to the question of how Malta defines itself as a welfare state and if the financial responsibility of social protections is really to be left to the private sector given the structural doubts and the European consensus. If one takes a pledge to the welfare of families and takes a decision, but others have to pay for it, that does not seem fair.

Author: Dr Lina Klesper - Legal Assistant PKF Malta
Published on Business Today: 28th July 2022
Get in touch:

See more Network News items