Thinking about having a baby? Don’t forget to do the maths first

If you’re applying for a new job and are thinking about starting a family in the next few years, the last thing you would want to do is ask human resources about your potential employer’s maternity pay package.

In a survey of over 1,000 parents by Mumsnet last month, more than eight out of 10 people said they were reluctant to ask potential employers about parental leave policies because they feared it “would make a job offer less likely”.

This is hardly surprising. Despite more modern attitudes in the workplace, there are still bosses who would not give someone a job if they thought that person was going to get pregnant in the near future.

Like the majority of those women, I was more worried about what getting pregnant would mean for my career than how I would finance my time off with my newborn. I naively assumed all maternity packages were roughly the same. I was lucky in that the FT’s maternity pay is relatively generous: it is not the best but far from the worst.

But I’ve since discovered that the variation in packages can mean the difference of tens of thousands of pounds in forgone income.

Becky O’Connor, personal finance specialist at Royal London, crunched the numbers for me. We started from the legal requirement. Everyone is entitled to statutory maternity pay (SMP) while on maternity leave; the threshold for qualifying is that you will have worked for your employer for 26 weeks when you reach the 15th week before your due date and earn at least £113 a week on average.

Basic SMP is paid at 90 per cent of your average gross weekly earnings for six weeks, followed by 33 weeks at £148.68 a week or 90 per cent of your pay — whichever is less.

Where it gets complicated is that many organisations choose to offer enhanced maternity pay above the statutory minimum, viewing this as a key way of improving the maternity experience for employees. Most don’t advertise their packages, though, so it’s hard to compare them.

To illustrate just how much of an effect maternity pay packages can have on your finances, Ms O’Connor created examples based on the net pay for a mother on £50,000 a year on different maternity packages. In the most generous example — a company offering six months’ full pay and six months’ half pay — the monthly net income (if the total was spread over the year) would work out at £709 a month less than the worker’s usual net monthly pay.

In the second example, at three months’ full pay, three months’ half pay and the rest statutory, the mother would be £1,662 a month worse off on average over the year. And in the third example, on statutory pay at £148.68 a week for nine months, the mother would be a very significant £2,296 a month worse off on average after tax for the first year of her child’s life.

The difference between a best-in-class package of six months’ full pay and six months’ half pay and basic statutory pay for someone earning £50,000 a year is about £19,000 in net disposable income for just one year.

This means that anyone hoping to become a parent in the next few years should take a close look at the maternity or paternity arrangements in their contract to work out what sort of income hit they will take in that job for a year.

If you are in the jobs market and are planning children in the next few years, be sure to factor the maternity package in as well as just the standard pay, especially if you are planning to have more than one child. Ms O’Connor says the difference between the best and worst packages could be tens of thousands of pounds, “which could wipe out a small salary improvement”.

The problem for most women is that the majority of companies don’t publish their packages, so women thinking about starting or adding to their families struggle to make informed judgments about job offers. Many wannabe parents, rightly or wrongly, feel that putting a question about maternity packages could bring their application process to a rapid halt.

This may be changing. There is a campaign by Mumsnet to call for large employers to publish their parental leave policies. Several major employers including Accenture, KPMG and PwC have voluntarily agreed to do so. Some of the best UK companies for maternity leave include Accenture, which offers 36 weeks of full pay. Transport for London, Aviva and Royal London all offer 26 weeks of fully paid maternity leave.

Their good example of transparency may encourage others to follow suit but a requirement to publish would achieve the desired effect a great deal more efficiently. As with gender pay reporting, throwing light on the matter reflects well on employers with generous packages and incentivises others to be better.

Women make up about half of the UK workforce and most of them get pregnant at some point during their working life. By keeping them better informed, most employers can retain them for longer and minimise their recruitment and retraining costs.

Another maternity pay factor has received even less attention: the impact of stopping pension contributions when female employees are on maternity leave.

While most workplace schemes allow new mothers to keep up their contributions while they are on SMP, the amounts seem so small that many stop the payments. This can be a costly mistake. Although they still make contributions as a percentage of their reduced income, their employer’s contributions are based on their normal salary.

Figures from AJ Bell found that a mother of two who takes a year off at 30 and another year off at 33 and pays no pension contributions in those years would find her pension £25,000 shorter by the time she retires.

A drop in income may be a small price to pay for a family. But don’t forget — the loss to income in the first year of your child’s life may just be the beginning.

Lucy Warwick-Ching is FT Money’s digital and communities editor; lucy.warwick-ching@ft.com; Twitter @WarwickChing

How do you feel about your own workplace’s parental pay package? Is it generous and accessible enough to new parents? And if you’ve taken maternity or paternity leave, how well were you supported when returning to work? Help us continue to report on this by sharing your experiences with Lucy confidentially here, or join the conversation below.