Family leave and employment

  • Helping hand: staff at King Edward VII Memorial Hospital maternity ward during an exercise in 2007

Plans to extend maternity leave to 13 weeks of paid leave and the introduction, for the first time of five days paternity leave, passed with overwhelming support in the House of Assembly last week and swept through the Senate as well.

There’s much to like about it. There is no doubt that the earliest weeks of a child’s life are critically important, both for bonding between the parents and the child, and for ensuring that infants get all they need in terms of nutrition and emotional support. Babies at this age are completely vulnerable.

In a different way, parents of the newborn are as well, especially in the case of a first child, when a whole new world of responsibility opens up, not to mention sleepless nights, dirty diapers and so on.

Parents should be free from worry in these early days, both in terms of finances and outside responsibilities, so they can focus on the child’s wellbeing.

The decision to recognise the father’s role in this is also welcome; aside from breastfeeding, fathers can and should play an equal role in the care and upbringing of an infant, and this responsibility should carry on throughout a child’s developing years.

The days of child rearing being “women’s work” are long over, and rightly so. Indeed, Senator Dwayne Robinson was correct to suggest there should be some flexibility in which parent should receive paid leave; where the father is paid less than the mother, this would make some sense.

With all of that said, it is with some trepidation that this newspaper questions the timing, although not the principle, of this decision. The reasons for concern are financial and centre on the ever-increasing burden being placed on employers in Bermuda and the effect this will have on employment and Bermuda’s competitiveness.

Recently there was a dispute between Frank Arnold, the owner of Arnold’s groceries, and the Minister of Finance, Curtis Dickinson. Mr Arnold had announced the closure of three outlets and said increases in payroll taxes were to blame for the closures.

Mr Dickinson fired back, noting Mr Arnold had paid less in payroll tax in 2018 than he did the previous year. That may be so, but any employer will tell you that the costs of doing business in Bermuda are rising at an alarming rate.

Some of these costs are government-driven, increases in social insurance payments and land taxes, for example.

Others increases come from other factors — compliance costs are driven by local and overseas regulators, increases in health insurance premiums come from the public sector and from private insurers and so on.

Other cost increases are out of Bermuda’s control, the surge in oil prices in September is an example of that, even though it was not sustained.

Taken individually, most if not all of these costs and the reasons for the increases can be justified, as the maternity benefit can. Taxes are increased because the Budget deficit must be reversed.

Plans to reform health financing have a logical basis. Proposals to make private pensions mandatory for non-Bermudian employees are justified, somewhat spuriously, because the current voluntary system is considered to be a deterrent to hiring Bermudians who must pay a pension deduction matched by the employer.

However, the Government must also be mindful of the cumulative effect of these changes.

The recent string of business closures and the widely held sense that the economy is going into recession mean that it is unwise to add to employment expenses when many employers are looking to reduce costs.

The result of changes like family leave may be better working conditions for those in work, but a marked reluctance on the part of employers to hire, leading to the creation of a permanent class of unemployed people.

In the case of family leave, it may well have a positive effect on recruitment and retention of staff, but it is also an added expense for the employer, who must either add another individual to the payroll for the length of the maternity leave or spread the employee’s workload to other staff. Either way, the company’s productivity drops.

This leads directly to the problem of Bermuda’s competitiveness which is determined by two factors, the excellence or otherwise of the services offered and the cost of those services.

In some areas like reinsurance Bermuda is a world leader and has been a centre for innovation.

But even in these areas, employers will look at the cost of doing business in Bermuda and must decide if the trade-off between quality and high cost is worth it. Too often in recent years, they have decided it is not and are putting jobs elsewhere.

When Bermuda adds to those costs, regardless of how well-meaning or well-intentioned the reasons are, it makes Bermuda less competitive still.

If a recession is looming, now is the time for Bermuda to reduce overheads and expenses, not to add to them.

This is hardly a new idea — after the 2008 financial crisis, US President Barack Obama cut payroll taxes in the US because his administration recognised that this would encourage employment.

Later, as the US economy improved, those payroll tax cuts were rolled back and US public finances began to be restored. Bermuda needs to take the same approach even if it means parents waiting a little longer to get their added paid leave.