Key Summary
- UK Government launches first full review of parental leave and pay to support modern families and boost the economy.
- Usdaw welcomes overhaul, calls for stronger rights, fair pay, and inclusive policies from day one.
- Aurora Capital warns reforms must account for small business realities or risk harming SME growth.
The government has launched a major review of the parental leave and pay system, promising to overhaul a structure that many families and businesses say no longer fits the realities of modern life.
The announcement — part of the government’s wider ‘Plan to Make Work Pay’ — has been broadly welcomed by retail sector stakeholders, although small business advocates are urging caution.
Described as the first full review of its kind in Britain, the initiative will look at every aspect of parental leave — including maternity, paternity and shared leave arrangements — with the aim of simplifying a system currently seen as overly complex and unaffordable for many.
Deputy prime minister Angela Rayner said the review would leave “no stone unturned” in addressing the needs of today’s working families. “Too many struggle to balance their work and home lives. Supporting working parents isn’t just the right thing to do — it’s vital for our economy,” she said.
Business secretary Jonathan Reynolds added: “Campaigners have long called for change, and this Government has listened. This review is our chance to reset the system and build something that works for modern families and businesses.”
The government highlighted that one in three fathers currently do not take paternity leave due to cost concerns, while take-up of shared parental leave remains low. Existing statutory pay rates are seen by many as inadequate.
Currently, new fathers can take two weeks’ paid leave, at a rate of either £187.18, or 90 per cent of average weekly earnings, whichever is lower. Maternity leave is paid at 90 per cent of average weekly earnings for the first six weeks, and then whichever is lower of that 90 per cent or £187.18 for the next 33 weeks. Shared parental leave allows a couple to share up to 50 weeks of leave and 37 weeks of pay between them.
Ministers also hope to simplify the system for both parents and employers, with the business secretary pointing to “eight different types of parental leave.”
Usdaw backs reform but demands broader action
Retail trade union Usdaw gave the announcement a warm welcome, backing ministers’ recognition that the current system “is not working.”
General Secretary Paddy Lillis said: “We welcome Labour’s review of the current parental leave system and agree that it is not working. While Usdaw has a strong track record of negotiating improved rights for working parents and carers, our scope is limited by a statutory framework that is failing millions of working parents. It needs replacing with a system that reflects today’s labour market.”
Lillis called for reforms that would promote gender equality, reduce pregnancy discrimination and close the gender pay gap. He also emphasised that rights must be made accessible to all workers regardless of employment status, available from day one, and backed by fair levels of pay.
Usdaw, which represents thousands of retail workers across the UK, said it looks forward to contributing to the review and will continue to push for wider improvements, including better access to childcare and flexible working arrangements.
Small business voices urge balanced approach
However, while the announcement has drawn praise from labour organisations, some in the business community — particularly those representing small and medium-sized firms — sounded a note of caution.
George Holmes, managing director of business finance experts Aurora Capital, warned that reforms must be sustainable for SMEs, which face different pressures than large corporations. “This review is welcome and has the potential to bring meaningful change for working families, but it cannot come at the cost of clarity and sustainability for small businesses,” he said.
Holmes stressed that policies must be simple, well-communicated, and properly funded.
“The government’s pledge to consult employers is encouraging, but without a clear plan to engage small businesses directly, there’s a real risk the review will skew in favour of larger corporations. SMEs face very different pressures, and any reform that ignores that will be costly and counterproductive,” he noted.
“Adding complexity or compliance hurdles without proper support would only slow down hiring and make life harder for firms already dealing with high wage costs and economic uncertainty.”