Britain’s small businesses left without adequate support to help working parents – finds new study

Major study led by Middlesex University surveyed thousands of small business employers and employees

Many small and medium sized enterprises (SMEs) – which make up 99% of UK businesses – can become overwhelmed by managing parental leave, according to new research.

SMEs urgently need a revamped package of Government support to help when their staff become parents, the study concluded. Findings have shown on average SME staff would take a pay cut of 8 to 9% to work more flexibly. 

This study, which drew on surveys of 2,000 SME employers and 2,000 employees, and 160 in-depth interviews with both managers and staff, found that:

• Many smaller organisations are unaware of their legal obligations to support expectant parents and can become overwhelmed by the need to manage this huge task. They may lack HR departments and written policies and have poor knowledge of statutory maternity, paternity and shared parental leave and pay entitlements. For example, SME employers and employees hugely over-estimate the amount of well-paid statutory pay available to both mothers and fathers.
• Most SME employers (57%) say they need more financial support from Government to cover the cost of staff taking parental leave, and only a small proportion can afford to enhance the statutory offers. Less than a third (30%) know about the smaller employers’ relief scheme and less than one in ten (7%) have used it and found it helpful.
• Bringing paternity leave to a minimum of 6 weeks paid at 90% of average earnings has the potential to reduce the gender gap in how much parental leave mothers and fathers would take.
• With flexible working arrangements, 44% of SME employees value ‘informal’ and 41% prefer ‘formal’ and would accept a pay cut of 8-9% on average to achieve it. Informal approaches to staff support can work well but require relationships of trusts, open conversations and ‘give and take’. 

The ‘Transition to Parenthood in SMEs’ study, funded by UK Research and Innovation  (UKRI), was a collaboration between Middlesex University, the University of Leeds and the University of Manchester, Working Families and the Fatherhood Institute.

They have also created a website toolkit for SME employers and employees, providing bite-sized information on pregnancy and future parenthood, parental leave, and the return to work, highlighting common concerns and providing good practice examples.

Based on their findings, the research team have identified recommendations that could improve outcomes for employers and staff in SMEs including reforming the Small Employers Relief Scheme, which allows small businesses to claim back parental leave. 

They have also called for a dedicated, non-transferable six weeks of well-paid paternity leave to support equal gender parenting.  

The researchers have also urged SME employers to consider flexible working options and clearly communicate policies and available support.

“It is vital that SME employers receive more Government support to help when their staff become parents. They are really struggling with managing this massive task when they should really be focusing their energy on other low-cost support such as flexible working.  Employees in our study emphasised how flexible working could be real a lifeline and allow them to return to work in the first place.”

Dr Bianca Stumbitz, a Senior Research Fellow at Middlesex University who led the research

Sarah Russell, MP, said: “Small businesses are the backbone of our economy. This research makes clear how few SMEs know that they may be eligible for financial support from Government under the Small Employers’ Relief scheme, when they have a staff member on parental leave. Strengthening parental leave and enabling more flexible working isn’t just good for families, it’s good for the UK’s productivity and long-term economic health. It’s vital that Government is better at sharing information about the support that is already available. The toolkit is a fantastic development for employers and employees.”

Simon Kelleher, Head of Policy & Influencing at Working Families, commented: “At Working Families, we work with employers of all sizes every day, and we see the challenges smaller organisations with limited HR functions have to overcome to manage pregnancy, parental leave and return to work well. That’s why practical, accessible support for employers matters just as much as reforming the statutory framework.

“When fewer than one in ten small employers have found the Small Employers’ Relief Scheme helpful, it’s clear the current system isn’t working as intended. The Government needs to simplify and strengthen that support, alongside modernising parental leave and pay, so that small businesses can focus on what they do best, which is offering flexibility, building trust and retaining skilled staff.”

Dr Jeremy Davies, Deputy CEO & Head of Impact & Communications at The Fatherhood Institute, said: “The UK’s statutory parental leave system already treats dads as second-class parents. This study shows an urgent need both to improve the statutory leave and pay offer – and to revamp support for smaller employers when parents take it.” 

Phil Coxon, Managing Director of Breathe HR, said: “More must be done to end the 'parenting penalty' disproportionately impacting SME workers. SMEs aren’t merely corporate enterprises in miniature; they have distinct needs, often operate on razor-thin margins, and responsibility for HR often lies with business owners rather than specialist teams. They need SME-specific guidance and robust financial support to help them better access underutilised schemes (like Small Employers Relief), enhance their parental leave offerings and create workplaces where working parents can thrive. As a working parent, and through our work at Breathe HR supporting more than 17,000 UK SMEs, I’ve seen first-hand just how transformative proper provisions for parents can be - to them, the business, and the economy as a whole.”

Key project findings were presented by the research team in the House of Lords today (4 March), followed by a panel discussion with speakers including Chris Russell (Federation of Small Businesses), Judith Dennis (Maternity Action), Dr Jeremy Davies (Fatherhood Institute) and Phil Coxon (Breathe HR). The event is due to be delivered in partnership with the APPG for Flexible and Family-Friendly Working, co-chaired by Sarah Russell MP and Baroness Penn.

For more information visit the Transition to Parenthood project toolkit website.

Photo by Bethany Beck on Unsplash