Small businesses in the UK are bracing themselves for higher employment costs, after a European Parliamentary committee voted on February 24 to back a proposal to increase paid maternity leave across Europe from 14 to 20 weeks.

Should the proposal become law, it would entitle women to take 20 weeks’ maternity leave on full pay – which the government claims would cost the UK economy an additional GBP1.5bn to GBP2bn. Under current UK legislation, women are entitled to six weeks’ leave at 90% of their salary. When the six-week period expires, they are entitled to a further 33 weeks on statutory maternity pay of GBP123 per week.

The state reimburses firms for much of the cost of statutory maternity pay. However, because the move to a 20-week period of full-time pay would effectively treble statutory maternity pay in the UK, businesses are concerned that the government will require them to take on a greater burden of maternity leave costs.

Fears have been expressed that extending maternity leave may put more small businesses off the idea of employing women of child-bearing age because of the costs involved. Many are said to be nervous enough about employing young women under the current rules.

The Tory spokesman on women’s issues, Marina Yannakoudakis, observed that: “Small business owners with only a handful of staff are struggling to meet payroll costs already, without the EU forcing them to pay a member of staff for five months without a day's work.”

Business leaders have heavily criticized the proposal as being ill-timed, claiming it will further jeopardize an already weak labor market as businesses recover from the recession.

National Chairman of the Federation of Small Businesses, John Wright, added that: “We desperately need a moratorium on changes to legislation until employers have found their feet again. We need to be left alone to get on with creating jobs and helping take Britain out of recession. EU law is actually exacerbating our unemployment crisis.”

Employment minister Lord Young has also expressed concern over the proposal, but pointed out that it is at an early stage. He also said that the UK’s current maternity leave policy is one of the most generous in Europe.