UK companies weigh the cost of extended paternity leave

Additional paternity leave that came into force last month means men with newborn babies in the UK can now take time off work for up to six months.

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With the royal wedding out of the way, talk is now rife on the royal baby.

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Going by family tradition, Prince William and Kate Middleton - or the Duke and Duchess of Cambridge as they are now officially to be known - should have their firstborn this time next year, barring any unseen circumstances.

Queen Elizabeth II had her first baby, Prince Charles, a year after her marriage, while William was born 11 months after the fairy-tale wedding of his parents the Prince of Wales and the then Lady Diana Spencer.

Whenever the baby comes, one thing is for sure: Prince William will not have to face the work or financial issues arising from the right to additional paternity leave that are a concern for many new British fathers.

The extended leave that came into force last month means men with newborn babies in the UK can now take time off work for up to six months, after their wives or partners end their maternity leave and go back to work.

For many employees, these new rules aimed at promoting work-life balance are not practical as they struggle to keep their jobs. Many employers think the regulations are bad for business at this time of economic hardship.

According to the British Chamber of Commerce (BCC), more than half of the 1,300 businesses it has polled say they expect the paternity leave requirements to be detrimental to their companies and could hamper job creation.

Economic data support their reservations. Although official figures last week revealed the economy grew 0.5 per cent in the first quarter, after the shock 0.5 per cent contraction in the previous quarter, this actually means Britain has not grown at all in the past six months.

UK retailers also suffered their worst drop in sales for 16 years in March, while a survey by the insolvency specialist Begbies Traynor found the number of companies showing signs of serious financial problems had climbed to 186,554 in the first quarter, or 26 per centover the previous quarter. And while unemployment has dropped, the number of those claiming benefits has risen, especially among the young.

David Frost, the BCC director general, said the extended leave scheme was just too much for companies to cope with, especially in the current economic climate.

The new rules also come at the same time as the phasing out of the retirement age of 65 for men and 60 for women. "In the face of promises by the government to listen to the needs of business and cut red tape, these two new pieces of employment regulation will hit businesses hard," says Mr Frost.

Additional paternity leave will allow an employee to take up to 26 weeks' leave to care for a newborn baby on top of the two weeks of ordinary paternity leave that was brought in nine years ago.

The rules, which also cover adoption, means parents can take six months off work each, with guaranteed pay for nine months in total. The rate is a modest £128.73 (Dh790) a week, or 90 per cent of average weekly earnings, whichever is less.

Those working for a small company fear they could lose their jobs if they take a few months off work. Also, many cannot afford to live on only one full income.

Largely for these reasons, 41 per cent of the 1,000 men surveyed by the comparison website say they will not take up the extended leave option.

Compared with larger companies, small businesses are disproportionately affected by the new rules, says the Federation of Small Businesses. Apart from the costs, most companies with fewer than 10 staff normally do not have the resources to process claims and arrange cover.

The extended paternity leave was first proposed by the previous Labour government. The coalition - at the urging of the Liberal Democrat leader and deputy prime minister Nick Clegg - is now considering a more flexible shared parental scheme by 2015. If the EU parliament gets its way, there will be even longer parental leave and more generous benefits in all its 27 member states.

With last Friday's wedding reviving a global and domestic royal mania that has been a big boost to the UK's retailers and hospitality industry, businesses must now be banking their hopes on a royal baby soon.