Day-One Parental Leave Is Good for Families but Terrifying for Britain’s Smallest Employers

I suspect few people who would argue that it won’t be better for men to be able to spend more time with their babies, or disagree that the changes the Government is proposing could benefit the economy through increased productivity while benefiting wider society. But small businesses and in particular the micro businesses are running scared, again.

Parliament is discussing reforms that will grant day-one eligibility for parental and paternity leave. These changes, set to come into force from April under the Employment Rights Act, aim to provide millions of workers with stronger protections and flexibility during early parenthood.

The reforms will:

• Remove the requirement to have worked for the employer for at least 26 weeks before the right to statutory paternity leave kicks in and remove the 12-month working requirement for unpaid parental leave.
• Allow parents to take leave from the first day of employment, aligning these rights with maternity leave provisions.
• Continue the government’s broader review of parental leave and pay, which may lead to more generous entitlements in the future, such as extended paternity leave and improved statutory pay rates.

Small and micro businesses with fewer than 50 employees account for more than 99% of all businesses and employ around half of the workforce. Unlike large corporations with dedicated HR teams and financial reserves, these businesses often operate with limited resources and lean staffing models. Introducing day-one rights and potentially longer paid leave periods could create several challenges:

Covering for absent employees is harder in small teams. Finding temporary staff or redistributing workloads can strain operations, especially in sectors like retail, hospitality, and care services where roles are highly specialised.

Although statutory pay is largely government-funded, businesses still bear indirect costs such as arranging cover, recruiting and training temporary staff, and managing workflow disruptions. For micro businesses, even short-term absences can impact cash flow and customer service.

Research shows many small firms struggle to navigate the existing parental leave system, which is seen as complex and fragmented. Additional reforms, while beneficial for employees, may increase compliance burdens unless accompanied by clear guidance and support.

On top of that there is a raft of imminent changes in April associated with the Employment Rights Bill and those come on top of the next increases in minimum and living wages. Despite these challenges, there are benefits:

• Offering equitable leave can increase morale and loyalty and reduce turnover, which is costly for small businesses.
• Better paternity leave encourages shared childcare responsibilities, enabling more mothers to return to work sooner. This could boost overall labour market participation and household incomes, contributing to economic growth.
• Businesses with a reputation for flexibility and family friendly policies may attract and retain talent even if they find it difficult to compete with bigger firms on salary.

The move towards day-one parental leave rights reflects a broader commitment to fairness and family wellbeing. It’s welcome but there has to be appropriate consideration of the needs of small and micro businesses. For them the transition will require careful planning and support. With the right measures, these reforms can empower parents without overwhelming the smaller businesses that keep Britain’s economy running.

Small businesses aren’t big businesses only small. They are entirely different in how they function and in the resources, financial and human, they have at their disposal to respond to Government policies. It’s time for policymakers to understand the businesses they write policy for and be proportionate, flexible and supportive. Without small and micro businesses there is no backbone to the UK economy.