Contractual issues during parental leave
Continuing contractual obligations during parental leave - dealing with redundancy, annual leave, and bonus payments.
The employment contract continues during any period of parental leave - unless it is terminated by the employer or employee.
Terms and conditions during parental leave
Some terms and conditions of employment continue to apply during parental leave.
You must continue to abide by the terms and conditions of employment relating to:
- notice periods
- any compensation if the employee is made redundant
- the business' disciplinary or grievance procedures
The employee must continue to abide by the terms and conditions of employment relating to:
- notice periods
- disclosure of confidential information
- acceptance of gifts, or other benefits
- working for another employer
The employment contract continues during parental leave unless it is terminated by you or the employee. This means that the employee continues to benefit from their statutory employment rights during parental leave and from your continued trust and confidence. Your employee must continue to act in good faith.
Whether or not other contractual terms and conditions, such as access to a company car or mobile phone and perks such as health club membership, continue to apply depends on the contract of employment, or you can decide on a discretionary, case-by-case basis. You should exercise caution in using discretion to avoid complaints of discrimination.
Pensions
Generally, an employee's seniority and pension rights are unaffected by parental leave, and rights on return from parental leave should be the same as they would have been if the employee had not been absent.
Since parental leave is generally unpaid, contributions to a money purchase scheme by employer and employee will usually be nil, unless the rules of the scheme provide otherwise. However, for final salary schemes, the level of employers' contributions depends on actuarial advice and not directly on the amount of an employee's earnings. Since parental leave counts as pensionable service, the employer may have to continue making contributions in order to keep the fund at an appropriate level.
However, if you choose to pay your employee during parental leave, you will need to make pension contributions as though they were working normally. Know your legal obligations on pensions.
Redundancy
If a redundancy situation arises while an employee is on parental leave, you must keep them informed and involve them in any consultations that are required.
If they are selected for redundancy, you must consider them for any alternative work that might be available.
Annual leave
An employee continues to accrue their statutory paid holiday entitlement during parental leave. Whether or not they also accrue contractual paid holiday entitlement depends on either the contract of employment or what you agree with the employee when they take their leave. Know how much holiday to give your staff.
Pay and benefits
Parental leave is unpaid - unless you have made paid parental leave a contractual right.
It is up to you, in agreement with the employee, to decide what contractual benefits continue during parental leave, eg, access to a company car, use of a mobile phone, and health club membership.
Bonus payments
Whether or not you must pay a bonus to an employee on parental leave depends on the type of bonus and the terms of the particular bonus scheme.
Generally, an employee will be entitled to the bonus if it relates to performance or work done before the leave began.
Therefore, an employee is unlikely to be entitled to the bonus if it is a reward for future work or performance, during a period in which the employee would be absent on parental leave.
Payments of bonuses during parental leave can be a complicated area. You should seek independent legal advice if you are unsure.