‘Overdue birth’ for maternity leave fund

It seems a long time ago today, but it was only in 2006 that a billboard campaign (organised by the Church, at the time) urged women that their ‘natural vocation’ was to be mothers, and opposed a government campaign to increase female participation in the labour force.

Times have certainly changed since then. In the past decade alone, the percentage of working women in Malta shot up from 32% to 52%. And with both main parties committed to increasing that percentage further still, incentives and schemes aimed at facilitating the balance between parenthood and employment have followed thick and fast.

The latest of these concerns a ‘Maternity Leave Trust Fund’, first proposed in the Labour Party electoral manifesto for 2013, to be topped up by all employers (regardless of whether any of their workforce actually goes out on maternity leave or not). 

Though broadly welcomed by womens’ rights associations, the suggestion initially didn’t go down too well with Maltese employers. 

“It is true the actual payment is going to be issued by the government, but what is conveniently being left out is we as employers will be paying for it through higher national insurance payments,” Joe Farrugia, director of the Malta Employers Association, said in 2014.

Similar objections were raised by the Small Businesses Chamber (GRTU).

But now that the fund has been launched, some of its former critics have softened their tone. The MEA cautiously welcomed the launch. “Women will be encouraged to join the labour market because this measure will lead to a level playing field between female and male applicants,” Farrugia said this week… though he added that there was still a “negative aspect”, as employers “still have to pay for maternity leave, even if indirectly”.

GRTU, on the other hand, has stuck to its guns. “Maternity leave leads many small businesses to go through increased pressure having to make up for less human resources while still carrying the same wage cost... The new system will definitely aggravate the situation and for the GRTU it is unacceptable to ask more from businesses.”

Clearly, opinion is divided among Malta’s business community. And all the scepticism expressed so far ultimately boils down to the same concern: while agreeing on paper with the aims of the initiative, there is disagreement regarding the all-important question of who gets to foot the bill.

But to what extent does the introduction of a maternity leave fund change the state of play for Maltese employers? And how does our situation compare with the rest of Europe, which is (broadly speaking) similarly embarked on a drive to increase female participation in the labour force?

Charlotte Camilleri is the MEA’s chief advisor in EU and Legal Affairs, so it’s a safe bet that she’d be able to shed some more light on the matter. I meet her at the MEA’s offices in South Street, Valletta, and it seems natural to ask her for her own opinion – as opposed to the official stand of the MEA – on the idea of a maternity leave fund.

“Personally I think it is long overdue. In other member states, it is not employers who pay for maternity leave. You would have a social security fund, and whoever is on maternity leave – depending on length of service with the company, and on how much National Insurance they have paid – would be eligible for an allowance…”

The situation is very different in Malta, where, until this week, employers were expected to fund 100% of employees’ maternity leave at full pay for 14 weeks. 

“In most member states, this would be funded by the State,” Camilleri goes on. “If the employer pays anything at all, it will be a nominal fee to top up the fund. But there is another difference. In the rest of Europe there will also be a number of fixed criteria for eligibility to paid maternity leave. Not so in Malta. From day one, female employees in Malta had a right to maternity leave at full pay – 100% – paid by the employer. That changed this week, with the introduction of the maternity leave fund… now, all employers in the private sector have to contribute to the fund, regardless of whether they have any employees going out on maternity leave.”

Under the new scheme, employers have to pay 0.3% of their pay roll to the fund. Camilleri however points out that certain details remain unclear.

“Initially there was talk of capping the total contribution to €70 per employee… which then went down to €65. Now, however, when the fund was launched, there was no capping mentioned at all. So we need a clarification as to whether there is going to a capping or not.”

However, given that we are talking about a goal – gender equality – that everyone agrees with in principle, Camilleri acknowledges the advantages of such a system.

“The only benefit that I see is that when an employer has two candidates before him in an interview, he is no longer going to say: if I select the female candidate, she will cost me 14 weeks of paid maternity leave. Irrespective of whether the employer chooses male or female employees, the contribution to the fund will remain the same.”

Coupled with other laws to ward against gender discrimination – which she will outline in due course – Camilleri views Malta’s current set-up as “definitely in favour of women, because it promotes better gender equality.”

Nor is this the only area where Malta has gone beyond the average European commitment to equality.

“Malta has one of the lowest gender pay gaps in the European Union, where the difference between male and female salaries can reach as much as 19%. But we have to keep in mind that the principle of equal pay for work of equal value, in Malta, doesn’t apply only between the sexes. It applies across the board. So you can’t have employees, even of the same gender, getting paid differently for the same work without any justification. This is something the European Union doesn’t even contemplate. In other member states, ‘equal pay for equal work’ applies only between the sexes…”

But unlike the rest of Europe, the Maltese State does not get directly involved in things like maternity leave.

“The only contribution from the State in Malta is an additional four weeks of paid leave – i.e, paid by the State, not the employer – beyond the 14 weeks of maternity leave. It is optional to the employee; she can decide to take them or not to take them. If she takes them, she will be eligible for a maternity benefit paid by the Social Security department at the rate of minimum wage. But in the vast majority of EU countries, the State pays for maternity leave, but not in full. In fact, until this week, it was only Malta and Greece where it was paid by the employer. But in Greece, employees didn’t automatically have a right to maternity leave. There were set criteria for eligibility.”

Similar criteria exist elsewhere in Europe; but the situation varies drastically from country to country. “Even entitlement varies. Bulgaria, for instance, has the longest period of maternity leave: 410 calendar days. Malta’s period of 14 weeks, is actually the minimum established by European directives.”

The biggest difference, however, concerns eligibility.  

“In Malta, every female employee is eligible to paid maternity leave. This is not the case in other EU member states. Criteria vary between countries, but normally they would include things like, that the individual must have been in employment for a certain amount of time. Or have paid a certain amount in National Insurance contributions. If not, then the employee would not be obliged to offer paid maternity leave. You can take time off, yes, but not paid leave.”

Coming back to the issue of who foots the bill: while the initiative launched this week may have addressed the issue of gender discrimination in employment, the fund itself appears to be discriminatory on another level. If employers are to pay 0.3% of their total wage bill, and there is no apparent capping of contributions… doesn’t this mean that larger companies paying higher salaries will be harder hit than others?

So couldn’t this fund be described as a tax to guarantee equality? If so, how fair is it on employees who do not employ any women? There are plenty of industries where female participation is practically zero: the obvious example that springs to mind is construction…

“Yes, you could definitely describe it as a tax. No doubt about that. Companies where the workforce was always male-dominated, which never employed women at all… suddenly they are going to be taxed, because other companies are employing female workers and they have to contribute to their maternity leave. I’m sure they’re not going to be delighted about it.”

Such concerns however have to be balanced out against the declared objective. Which brings us to the question of why such measures are considered so important in the first place. Malta’s drive to increase female participation may be cloaked in the discourse of equal rights, but it is an open secret that there is a pressing economic necessity in the background. The so-called ‘pensions time-bomb’.

How effective can individual measures such as this be, when faced with what is widely described as an unsustainable situation? And looking at it from a purely economic perspective: how urgent is the need to defuse this bomb, anyway?

Camilleri points out that other individual measures have already proved singularly successful. “In recent years, female participation in the labour force increased exorbitantly – up from 32% to 52% in less than a decade. There were a lot of measures involved: a lot of tax credits, for instance. And in April, government offered free childcare for all employees… which definitely made a difference.”

As for the sustainability issue, Camilleri argues that this type of success, on its own, may not be enough… even if she doesn’t see the pensions bomb going off any time soon.

“Sustainability of pensions is an issue for the future, not now. It is not an immediate problem. But I think that, rather than increasing female participation in the labour force, we need to increase the birth-rate. Our birth-rate is extremely low compared to other EU countries. And that is going to be a problem in the future…”

But surely, you could describe the maternity leave fund itself as an effort in that direction. Certainly it makes it easier for working women to have children.

“Well, if a woman doesn’t want to have more children, I very much doubt whether incentives are ever going to change her mind. But that they facilitate matters for women in employment… yes, definitely.”