Employment Bill

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The Chairman: Order. I should prefer the Committee to get down to the amendment. We shall not go back and begin discussing the timetable again.

Mr. Hammond: I am grateful to you, Mr. Benton. That point having been made, we now need to make fairly rapid progress through today's large agenda to reach the end of the section that the Government have timetabled for today. I shall therefore try to step up the pace.

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Amendment No. 127 addresses the Government's intention that the amount of earnings to be paid under statutory paternity pay should be 90 per cent. of the relevant earnings or the fixed prescribed rate, whichever is lower. We know that only because it is stated in the explanatory notes; it is not in the Bill. The amendment invites the Government to place in the Bill a statement that statutory paternity pay will be 90 per cent. of a person's average weekly earnings or a statutory paternity pay rate to be prescribed in regulations, whichever is lower.

Amendment No. 147 seeks to define average weekly earnings. I am sure that the Minister will correct me in a moment, but I cannot find a definition in the Bill. I have lifted one from elsewhere and included it in amendment No. 147, with the intention of inviting the Minister to confirm that it is correct for these purposes. Interestingly, it includes a definition of payments made ''as a self-employed earner'', which relates to a point made by my hon. Friend the Member for Hertford and Stortford in the previous sitting about self-employed people who pay national insurance contributions. In responding to amendment No. 147, it would help if the Minister could explain what entitlements self-employed people will have under the statutory paternity pay scheme.

Amendment No. 138, which might seem to cover a point of semantics, would replace ''normal'' with ''average'' in respect of earnings. As I understand it, normal earnings are average weekly earnings. Can the Minister explain the difference between those cases where average weekly earnings are specified, and those where normal weekly earnings are specified? I find the terminology slightly confusing, and this is not the first time that a concept has been referred to in different places by different names.

Alan Johnson: Amendment No. 127 would establish in primary legislation that payments must be the lesser of 90 per cent. of average weekly earnings, or the prevailing flat rate. We have made it clear that statutory paternity pay will be paid at the same standard rate as statutory maternity pay, which, from April 2003, will be £100 a week, or 90 per cent. of average weekly earnings where that is less.

I am happy to reassure hon. Members that it remains our intention that paternity pay should mirror maternity pay, but I do not think it necessary to include such a provision in the Bill. This right is a new one, and as has been said in other contexts, it is not inconceivable that we might wish, over time, to introduce a flexibility that is not currently anticipated. As matters stand, I cannot foresee that, in setting paternity pay, it would make much sense to depart from the formula for maternity pay, but I am not sure that we need specify that in primary legislation.

Mr. Hammond: On reflection, and having heard the Minister's comments, I rather wish that, instead of prescribing the rate, I had prescribed a link with statutory maternity pay. Is the Minister tempted to think that statutory paternity pay should be defined in terms of statutory maternity pay?

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Alan Johnson: We have debated that question in respect of several clauses. We have to cater for all eventualities, and it is right to give ourselves some flexibility. At the moment, I cannot think of any circumstances in which we would move away from such a link, but it would be dangerous to cut off the option.

Amendment No. 147 tries to do two separate things, the first of which is to define the phrase ''average weekly earnings''. I hope that I can satisfy the hon. Gentleman that the amendment is unnecessary in that respect. Clause 4, which will insert a new section in the Social Security Contributions and Benefits Act 1992, defines ''normal weekly earnings'' in a manner almost identical to the amendment. I know that the hon. Member for Runnymede and Weybridge is concerned about the difference between ''normal'' and ''average'', and I shall return to that issue when I deal with amendment No. 138.

Hon. Members might also be concerned about ''earnings''. For the purposes of statutory paternity pay, that word will be construed in exactly the same way as for statutory maternity pay. As with statutory maternity pay, the definition will be set out in regulations, and will define earnings as gross earnings including any remuneration or profit derived from an employee's employment.

The second part of the amendment is opaque, but the hon. Gentleman clarified it when he spoke. He suggested that employers should include any earnings that their employees may have gained from self-employment in calculating and administering statutory paternity pay, which would be a significant departure from the precedent set by maternity pay. If the man in question is or has been genuinely self-employed—he would be an employed earner but would also be self-employed in another capacity—it is difficult to see how his employer could know his earnings from self-employment and make the calculations necessary to account for them.

The hon. Gentleman proposes that employers should be responsible for administering the entirety of their employees' pay, and that would be burdensome on business. Most likely, it would also be totally unnecessary because we are discussing calculations for people who qualify for the lower 90 per cent., and they must earn less than £111 at current rates. The amendment would add many complex burdens to address a small, if not entirely absent, problem.

11.15 am

Mr. Prisk: When the Minister refers to self-employment, does he use the definition used by the Inland Revenue or that used by tribunals?

Alan Johnson: It certainly is not the definition that the hon. Gentleman is trying to include in his ten-minute Bill.

For the purposes of standard employment rights the self-employed are, by definition, not employees and cannot logically qualify for leave rights. Furthermore, they are not employed earners for the purposes of pay

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rights because they have no employer to administer pay, which means that they cannot receive paternity leave or paternity pay. I am unsure which definition covers them, and perhaps I should take a rain check on that issue.

Norman Lamb: Tribunals.

Alan Johnson: The hon. Member for North Norfolk (Norman Lamb), from his experience in this area, suggests that it would be the rules used in tribunals.

Mr. Prisk: The Minister is right that that definition should be used, but the point of my question was to let him recognise the difficulty caused for employers by the existence of two definitions.

Alan Johnson: The hon. Gentleman has made his point for the record.

Amendment No. 138 provides me with a useful opportunity to explain what will be in the regulations made under the power in new section 171ZJ(8). In doing so, I shall explain why ''normal'' is used instead of ''average''. I hope that I can reassure hon. Members that we all want to achieve the same result—a formula that is fair to employees in properly reflecting what they receive from their employment and fair to employers because it is straightforward to calculate. The key is to use the same rules used to determine statutory maternity pay.

Without going into enormous technical detail—though I have brought a large briefing into Committee as a threat—one cannot use an average because it would be improper to include some payments made in the period in question. For example, a one-off bonus payment would not reflect an individual's normal earnings. The rules are not too complex; employers said, ''Keep them the same as statutory maternity pay. We understand that now, for all its wild and wonderful ways.'' When we consulted on extending the period to 26 weeks, employers, along with various other groups, said that we should stick to eight weeks. We must stick to the system that employers know and for which they feel, if not love, at least affection, and that means that we shall go by the rules for statutory maternity pay.

The calculation of a person's normal weekly earnings for the purpose of statutory maternity pay is set out in regulation 21 of the Statutory Maternity Pay (General) Regulations 1986, which is perhaps the provision that the hon. Member for Hertford and Stortford was looking for. We intend to mirror that calculation both for statutory adoption pay and for statutory paternity pay. Substituting ''average'' for ''normal'' would remove a crucial step in that process.

Norman Lamb: It makes sense to mirror the approach taken to statutory maternity pay, but I want to raise a broader issue. Pay is calculated in different ways for various rights to paid time off—for example, the right to holiday under the working time regulations or the right to maternity and, now, paternity pay. When I wrote about that in my previous existence, understanding the different approaches taken under different legislation was a tortuous process. From the point of view of the employers who are to administer this, it is time that there was one basis for calculating pay for all the

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various rights to paid time off. I urge the Minister to have his Department consider simplifying the basis upon which such pay is calculated.

Alan Johnson: I take the hon. Gentleman's point, which he made eloquently. We can certainly consider that.

The amendments are unnecessary for several reasons. I have made it clear that the rate of statutory paternity pay will be the same as that for statutory maternity leave—in 2003, £100 a week or 90 per cent. of average weekly earnings if that is less. Paternity leave and statutory paternity pay are rights of employees and employed earners respectively. It would not be right to burden employers with additional calculations concerning any earnings that their employees may gain from self-employment. I have also made it clear why it is right to refer to normal, not average, weekly earnings. On that basis, I hope that the hon. Gentleman can withdraw the amendment.

 
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