8.1.2 Impact on companies

Relative to the baseline, both the non-legislative option and Option 1 are expected to lead to higher productivity, as skilled workers would be more likely to return to employment after maternity leave, and to lower recruitment costs, as companies avoid the costs related to having to hire and train new workers. Companies would also benefit from mothers taking less absence from work due to the impact of breastfeeding provisions on health. For Option 1 there would be an adjustment cost to purchase equipment to facilitate breastfeeding (e.g., fridges) estimated at € 40 per business in the first year of legislation. However after this initial cost the benefits are estimated to outweigh the costs. There could be an additional cost of reserving space for a room for breastfeeding. If a room of 2.5 square meters was needed exclusively for breastfeeding, the cost to businesses would be €521 million per year (using 2015 prices). However, it has been assumed that the room with facilities for breastfeeding can be used for other purposes as well, and that therefore there is no additional real estate cost linked to the presented Options. This leads to an average net benefit of €8 per business in 2050 for Option 1 compared to the baseline. In total in the EU, Option 1 would result in a net benefit for companies of € 1 029 million over the 2015-2055 period.

As the additional maternity benefits payments will be borne by Member States/Social security partners, Option 2 would have similar impacts on companies as Option 1. In total in the EU, both Options would result as well in a net benefit for companies of € 1 029 million over the 2015-2055 period as well.

In both Options 1 and 2 overall benefits arise to business from these policy changes (€ 1029 million). Member States which do not have related provisions or fall significantly below the requirements of the options 273 make up 11% of this positive impact in Option 1, and 9% of this positive impact in Option 2.

An assessment of the cost for micro-businesses shows that the cost of both policy options represents a very small share of the companies' total turnover (equal or under 0.5% of turnover in all countries except for NL where it is 1.2%) 274 , and very close to the level of cost under the baseline. Therefore the policy options do not disproportionately affect the performance of SMEs.

Table 1: Estimated impact of maternity leave options on companies, relative to the baseline (EU) 275

8.1.3 Impact on Member States

Option 1 would have a small positive budgetary impact on Central Governments compared to the baseline through reductions in unemployment benefit payments and increased taxes, which are driven by higher employment and earnings. In both options, breastfeeding provisions are assumed to support breastfeeding, which provides health benefits to mothers and children. Option 2 entails a rise in maternity leave benefit payments for two weeks in some Member States 276 and hence has a small negative budgetary impact on Central Governments.

There is no change in administrative burden for central governments or social security providers under any option, as there would be no change in maternity leave take- up.

The total impact on Central Government and social security providers is a net benefit of €5.8 billion in Option 1, as positive impacts on health care systems and improved tax revenues exceed any costs arising from increased unemployment benefit payments, and a net cost of €2.4 billion in Option 2 (mainly arising from additional benefit payments). In terms of the impact on the different clusters of Member States, in Option 1, the Member States which do not have no currently provisions 277 account for 7% of the benefit to Central Government budgets. The Member States which fall somewhat below the requirements 278 make up a further 67% of the benefit. In Option 2 the Member States which already meet the requirement 279 only have a (significant) positive impact on Central Governments budgets. The other Member States register costs to the State.

Table 2: Estimated impact of maternity leave options on Member States, relative to the baseline (EU) 280

In terms of macroeconomic effects, all options would result in an increase in labour market participation and in an increase in working hours, due to improved breastfeeding provisions for working mothers.

Compared to the baseline, in 2030, the provisions foreseen in Options 1 and 2 would result in a small increase in total employment ranging between 4 000 (Option 1) and 5 000 (Option 2). The increase in employment and increase in pay for women whilst on leave would lead to an overall increase in real incomes by between €0.2 billion (Option 1) and € 0.8 billion (Option 2) in 2030. Women’s full-time employment after maternity leave would also be expected to improve.

Employment increases due to provisions for breastfeeding that facilitate mothers return to employment after taking maternity leave. There is a further multiplier effect due to the increase in incomes and consumer expenditure which leads to an increase in output and GDP. Over the 2015-2055, the positive impact of the measures on GDP is estimated to range between € 8.3 billion in Option 1 and € 13.3 billion in Option 2. For Option 2, around 81% of the positive impact on GDP would be concentrated in Member States which fall somewhat below the requirements of this option and represent 71% of MS 281 . Around 9% of the GDP increase will be concentrated on the 4 countries where measures ranked as currently falling substantially below the requirements 282 .

Both options have a positive impact on competitiveness. In both options in 2030 increase in net exports is estimated at € 0.1 billion and domestic prices would decrease by 0.1%

Table 3: Estimated macro-economic impact of maternity leave options

In both options the rate of employment growth and growth in earnings would be slightly higher among women than men, thus a slight narrowing of the gender gap in employment would be expected. In 2050, it is foreseen that with Option 1 female employment would increase by 8000 (compared to -2000 for male employment) and in Option 2 by 11000 (compared to -2000 for male employment).

8.1.4 Comparing the Options

Effectiveness: The non-legislative option could carry some benefits to women's participation in the labour market by supporting their faster return to work after taking leave. Options 1 and 2, by introducing legal provisions, would have a higher a higher impact than the non-legislative option. While Option 2 would provide some additional support for women while on leave, the effectiveness of this measure in addressing the problem outlined compared to Option 1 is limited.

Efficiency: All options would have positive impacts on individuals and companies. Except for option 2, all options would have a positive impact on Member States as well. A non-legislative option would avoid some of the costs linked to the binding obligations (e.g. the full pay requirement). Moreover, in contrast to Option 1, the non-legislative option would grant Member States and businesses more flexibility regarding the introduction of practices facilitating transition from maternity to work. The introduction of full pay for the compulsory period of maternity leave (two weeks) in Option 2 could entail substantial costs on Member States, while having a limited impact on women’s return to the labour force after taking leave.

Coherence: All options improve the situation of pregnant women. In particular, the options would facilitate the exercise of the rights recognised in Article 33 of the Charter of Fundamental Rights, which specifically refers to the reconciliation of family and professional life.

The non-legislative Option has been identified as the preferred option for Maternity Leave. The non-legislative option would have a positive impact on individuals by facilitating mothers' return to employment after taking leave as well as a positive impact on companies and Central Governments. The non-legislative Option only entails limited costs on companies due to the potential provision of breastfeeding facilities and breaks. It also entails benefits due to an increase in workers' productivity and a reduction in recruitment costs. In terms of its impact on Central Governments, the non-legislative Option does not foresee any additional payment of maternity benefits but does foresee savings due to a reduction in payment of unemployment benefits and hence has a more positive impact on Central Governments than Option 2 in the medium-term. The non-legislative Option hence appears to be the most efficient maternity leave option to support female participation in the labour market.

8.2 Paternity leave

The non-legislative Option would not require Member States to change their national legislation to introduce paternity leave or change the existing provisions. Option 1 would require Member States to introduce paternity leave or to extend the duration of paternity leave to one week 283 . Option 2 would have an additional impact on the Member States that currently do not provide for pay at sick pay level 284 . Option 3 would require Member States to introduce leave or extend the duration of leave to 2 weeks 285 .

8.2.1 Impacts on individuals

Option 1 would reserve a period of leave to fathers, and therefore rebalance the leave provisions that are reserved respectively to women and men when they become parents. The impact on take-up by fathers in Member States where there is currently no entitlement would be limited because, as shown in the problem definition, when leave periods are not paid, fathers choose not to, or are unable, to use their entitlement. Therefore Option 1 is likely to have a limited impact in terms of facilitating a more equal distribution of work and caring responsibilities, and therefore on female employment  286 .

Option 2 would have more impact on take-up of leave than Option 1 because providing pay would enhance the real possibilities for fathers to make use of the leave. 287 This would give the opportunity for fathers to spend more time with their child and play a greater caring role. This would have a direct positive impact on the work-life balance of fathers. It would support their taking of a greater share of care responsibilities, and therefore have an indirect positive impact on female employment.

Some effects would materialise in the future: when fathers take paternity leave, there are changes to the assumption that women will always be the (only) parent absent from work after having a child. Furthermore, paternity leave is estimated to have a further leverage effect 288 on parental leave, which further alters the sharing of unpaid care work among parents and supports female employment. This effect is driven by the timing of paternity leave, around the birth of the child, which is when new caring responsibilities arise and can begin to be shared between parents.

Option 2 is also expected to have a positive impact on the quality of life of mothers, children, and fathers themselves. This can be significant at the individual level as research shows increased wellbeing and child health in families where the father is present in the early weeks following a child’s birth. If fathers participate more in childcare and family life, children enjoy higher cognitive and emotional outcomes and physical health 289 and it has been shown that fathers who care for children early tend to stay more involved as children grow up. 290 Fathers who engage more with their children tend to report greater life satisfaction and better physical and mental health than those who care for and interact less with their children 291 . Mothers also are better off, in particular they experience quicker recovery and they have a lower risk of post-partum depression when their partner takes paternity leave. 292

Option 3 would have similar effects as Option 2, but as a longer period of leave is provided, the impacts would be stronger, in terms of supporting father’s taking of a greater share of care responsibilities, and therefore female employment. The leverage effect on parental leave referred to above is more likely to occur with paternity leave of 2 weeks or more 293 . Option 3 would also have a stronger impact on bonding between father and child, by giving the opportunity for fathers to spend more time with their child.

By facilitating a more equal distribution of work and household responsibilities, and thus contributing to female employment, all options could indirectly contribute to the reduction of poverty among women and their families, given that dual-earner households are at a lower risk of poverty 294 .

The non-legislative Option would have similar positive impacts on individuals but the extent of these impacts would depend on the degree of implementation of the non-legislative instruments.

8.2.2 Impacts on companies

The benefits of the non-legislative option and the three legislative options derive from a stronger commitment to the organisation and the profession from new fathers, who can spend some time with their family around the time of the birth of a child; this can retaining staff and also reducing absenteeism. 295 These benefits, however, cannot all be quantified.

In contrast, the costs have been quantified in great detail and they consist of a small potential loss of production when more fathers take these short periods of paternity leave 296 , the payment of additional paternity benefits in Member States where they are required to, and administrative burden to process paternity leave applications. Due to the leverage effect of paternity leave, more fathers will take parental leave. This will lead to a cost in those cases where employers choose to replace these individuals while they are on parental leave.

Estimates suggest that while the average annual cost per company is higher than in the baseline situation in the three options, the difference is small, see table below. In 2050, the average cost would be € 3 higher than the baseline for option 1, €14 for option 2 and €43 for option 3.

The estimated costs for microbusinesses are equal or below 0.1% of turnover 297 and very close to the level of cost under the baseline. Therefore the policy options do not disproportionately affect the performance of SMEs. Some short-term negative effects cannot however be discarded as clarified above (e.g. the leverage effect on a greater take-up of parental leave)

Employers report 298 that they perceive paternity leave as an easy process, as it concerns a short period, it can be anticipated and it is generally considered to be similar to annual leave in organisational terms for the company, so it can be reasonably assumed that none of the options assessed would lead to significant implementation costs or disrupt the organisation of work. There is also anecdotal evidence that some companies already offer paid paternity leave to their employees  299 .

Table 4: Estimated impact of paternity leave options on companies, relative to the baseline (EU) 300

Note: These calculations include an estimation of the leverage effect of paternity leave on father's take-up of parental leave. Costs due to leave request processing and lost production take into account the costs due to a higher take- up of parental leave.

8.2.3 Impacts on Member States

The budgetary impacts for all options on Central Governments are limited. There are small changes in employment, earnings and labour market participation in all options, as they affect leave options for a small subset of the working population (new fathers) over a period of 1-2 weeks, so changes in tax receipts and unemployment benefit payments are small too. Where there are employment impacts, the gender employment and pay gaps narrow slightly. It is also expected that the level of healthcare provision changes, as fathers who take paternity leave are more supportive to their partners, which reduces the healthcare requirements for new mothers.

The budgetary costs are relatively small under all options. The cost related to payment of paternity benefits and the administrative burden is marginal, as the level of payment for paternity leave (due to the relatively short duration) is low and the change in take-up in most countries is small. The majority of this increase in benefit payments is assumed 301 to fall on public budgets. The absolute changes in administrative burden are relatively small.

The impact on the state in different country clusters is as follows: in Option 1, Member States which fall significantly below the requirements 302 make up 1% of the cost to the State in this option, whereas those which fall only somewhat below the requirements 303 are responsible for 53% of the costs. Although the impact in terms of legislative change is large for countries not yet offering paternity leave, as the leave is unpaid, the impact is relatively small. In Option 2, Member States which fall significantly below the requirements 304 make up 12% of the cost to the State in this option. In Option 3, Member States which fall significantly below the requirements 305 make up 8% of the cost to the State.

Table 5: Estimated impact of paternity leave options on Member States, relative to the baseline (EU) 306

Note: These calculations include an estimation of the leverage effect of paternity leave on father's take-up of parental leave. Costs due to leave request processing and lost production take into account the costs due to a higher take- up of parental leave

The macroeconomic effects of the paternity leave options are small. There is also a small longer term effect through paternity leave take up increasing the take-up of parental leave among fathers. The increase in employment and reduction in working hours have opposite effects which cancel each other: the small increase in employment of temporary workers (through the leverage effect of paternity leave on fathers taking parental leave) leads to an increase in income, consumption and GDP. Counteracting this effect is a small reduction in working hours for fathers with young children, which marginally reduces the productive capacity of the economy, leading to a small reduction in output and GDP. Estimates show no impact on competitiveness (in terms of net exports and domestic prices) for all three options.

In Option 1, the slightly negative GDP impact only marginally arises from changes in member States which have no current provisions or fall significantly below the requirements 307 (1%) with Member States which fall only somewhat below the requirements making up 68% of the impact 308 . In Option 2, the impact of the legislative change on Member States which fall significantly below the requirements 309 is positive whereas the overall impact remains slightly negative. In Option 3, both the cluster of Member States which fall somewhat below the requirements 310 and the cluster of Member States which fall significantly below the requirements 311 register GDP benefits, with the slightly negative/neutral GDP impact mainly resulting from a very slightly negative impact in Member States which already meet the requirements 312 .

Table 6: Estimated macro-economic impact of paternity leave options

8.2.4 Comparing the Options

Effectiveness: A non-legislative option would most probably imply barely any improvement vis-à-vis the baseline scenario and, therefore, not be very effective. Option 1 would have limited effectiveness in improving work-life balance and women’s participation in the labour market because men are unlikely to make use of the entitlement if it is not compensated. Option 2 would be more effective than Option 1 as the leave would be paid but to a lesser extent than Option 3. Option 3 would be the most effective in facilitating women’s employment as the literature suggests that “leverage effects” on future take-up of parental leave are more likely to occur with a longer paternity leave of 2 weeks or more, so the positive long-run impact on women in the labour market would be largest. It is also slightly more effective in terms of supporting a balanced use of leave between parents as fathers take up of leave would increase.

Efficiency: Although limited, Option 3 has the highest costs on companies and central governments. Option 2 would have fewer costs than Option 3 because of the shorter period of benefit payment. A non-legislative measure would have limited costs given the uncertain implementation by Member States.

Coherence: All options have positive impacts on parents and positive impacts for children as they enhance the rights of the child to be cared for by his/her two parents and are fully consistent with the Charter of Fundamental Rights, while enhancing some of the rights enshrined therein, in particular the respect for private and family life (Article 7).

Option 3 (an individual entitlement to two weeks paternity leave paid at least at sick pay level) has been identified as the preferred option. As mentioned above, evidence of Member States' experiences suggests that where leave is remunerated, it has a strong positive impact on its take-up by men, as well as female employment outcomes 314 . Options 2 and 3 would thus have a much higher individual positive impact than Option 1 and the non-legislative Option. Although Option 3 has the highest cost for companies, when disaggregated the cost represents only 14 € per company in 2030 and 43 € per company in 2050. Moreover, thanks to its longer duration, Option 3 is the option that best improves the possibilities for fathers to be involved in caring responsibilities directly following the birth of a child. Evidence also shows that the leverage effect on parental leave, which has highly positive impacts on GDP, labour force participation, employment and real incomes (see below), is more likely to occur with paternity leave of 2 weeks or more. Option 3 hence appears to rank higher in efficiency compared to the other paternity leave options assessed.

8.3 Parental leave

Based on the available information, the non-legislative Option would not require Member States to change their national legislation to change their existing provisions on Parental Leave. Option 1 would only require one Member State 315 to change its legal framework to allow for flexibility in taking parental leave. Option 2 would require the same adjustments as Option 1. It would additionally require that Member States guarantee payment at least at the level of sick pay for the one non-transferable month. 316  Option 3 would require the same adjustments as Option 1. In addition to Option 1, Member States 317 would have to guarantee payment at least at level of sick pay for the 4 months period of leave. Increasing the non-transferable period to 4 months would also be required 318 . In addition, it should be ensured that this non-transferable period is compensated at least at sick pay level 319 . An increase in the maximum age of the child up to which parents can take parental leave from 8 to 12 years old would also require some Member States to change their national legislation 320 .

8.3.1 Impacts on individuals

Option 1 would facilitate the use of parental leave by both parents through the entitlement to flexibility, which would allow them to choose when and how to use the leave. For example, for parents who may be unwilling or unable to stop work completely, flexibility can help minimise the negative financial impact of taking leave. 321 Flexibility can allow workers to maintain the benefits of a connection to the workplace, minimise the interruption of work and maintain their skills. The decision of fathers to take parental leave depends to some extent on flexibility of leaves. 

For Option 2, the introduction of the requirement for pay for part of the period would have an additional direct positive impact on the take-up of leave. In addition, introducing a pay requirement would enhance the effectiveness of parental leave in facilitating work-life balance for parents with low and middle incomes, who most likely cannot afford to take unpaid leave. Such a measure could therefore also reduce the risk of poverty in households with children. Option 2 also provides an incentive for fathers, as well as mothers, to increase their take-up of leave. This has a direct positive impact on their work-life balance and it also supports fathers’ taking a greater share of care responsibilities, which can extend beyond the period of parental leave taken. As a consequence, it should increase the availability of women for increased labour market participation. Supply of female labour is stimulated as women are more available to remain in the job once they have children, and as demand for female labour is also stimulated because when more men use leave 322 , this mitigates the assumption that women are the parent taking leave. Option 2 would also result in more women returning earlier to employment, and having shorter career interruptions. The level of employment is expected to rise as are average earnings. This will lead to an increase in average household incomes and have a positive effect on the number of households in poverty. Option 2 is also estimated to have a beneficial effect on the health of women and children and would result in positive impacts for children’s cognitive and social development, as referred to in the problem definition. Four weeks of parental leave by fathers are found to increase children’s performance in school. 323 Therefore, additional positive impacts would materialise in the future.

Option 3 would have similar beneficial effects in terms of the health and well-being of women and children, but it would also have even greater benefits regarding fathers’ take-up than Option 2. As all four months of the leave would be paid as well as reserved for the fathers, take-up and length of leave by fathers is likely to increase, given the evidence suggesting that fathers are more likely to make use of their entitlements when they are adequately paid and reserved for them 324 . There is a stronger incentive for fathers to take leave 325 , the stigma of doing so is reduced 326 and it legitimises the idea of fathers taking leave, thereby easing potential objections from employers 327 . Therefore, a more balanced share of caring responsibilities between women and men can be expected, with a positive impact on equality between women and men in the labour market. Increasing non-transferability for the full four-month period in Option 3 would lead to some adjustments in the arrangements between parents to decide who takes the leave on the basis of the personal or financial situation. It might also reduce the overall period of parental leave women take, given the evidence that men tend to transfer their share of leave on to women. However by limiting the possibility for fathers to transfer their leaves on to mothers, it would reduce the risk of women’s extended absences in the labour market after having children relative to men, which would limit the negative scarring effects on their careers and enhance their professional prospects. Improving the likelihood of women’s return to the labour market would also reduce the risk of poverty among women and their families, since dual-earner households tend to be at a lower risk of poverty. Moreover, by providing payment for the full four-months of leave, this option would provide increased income security for families and could substantially reduce the risk of poverty among households with children. As mentioned in Option 2, Option 3 is also expected to have positive impacts on women and children health as well as children's cognitive and personal development.

In addition to the parameters which compose the three options assessed above, increasing the maximum age of the child to 12 years old would also have a positive impact on individuals as it would increase the flexibility for parents to take parental leave and will likely increase the length of their take-up of the leave, with all the associated benefits on parents and children described above.

The non-legislative Option would have similar positive impacts on individuals similar to those described above but they are expected to be weaker giving the non-legal character of that option.

8.3.2 Impacts on companies

The impacts of the considered options for companies include a temporary potential loss of production, the costs where employers choose to replace existing staff who take parental leave 328 (recruitment costs of possible replacement staff), and there can be an increase in administrative burden in processing increased numbers of parental leave applications. There will also be benefits to companies, as individuals taking parental leave are expected to take fewer days off work due to sickness (or sickness of the child), and are more likely to return to the same job after taking parental leave, which reduces recruitment and training costs and in turn increases productivity, as skilled staff are retained.

An indirect increase in the demand for female employees can be expected due to changes in the notion that the ‘costs’ of childrearing are strictly associated with mothers. Employers could start anticipating that men, and not only women, may take leave after having a child. This could function as a ‘signalling’ tool for employers and employees and reduce disincentives to hire women of childbearing age 329 . The quantitative analysis, however, does not include such indirect impacts.

Overall, the costs related to increasing numbers of men taking short periods of leave or part-time leave for certain periods are inferior to the costs of women taking longer leaves, due to the reduced need to find replacement and the lesser skills depreciation. Moreover, flexible use of parental leave should not have any strong disruptive effect on companies. Employers would benefit from retaining qualified employees on the job instead of hiring and training new employees 330 , with benefits particularly high for employers in female-dominated sectors

The quantitative analysis suggests that impacts on companies are mixed in all options. For all of them, there is an increase in take up of parental leave. This leads to an increase in administrative burden for employers, largely due to the requirement to process more applications for leave. The total increase in administrative burden to employers in the EU is estimated to be of € 48 million in option 1, € 402 million in option 2 and €844 million in Option 3 for the period 2015-2055. The increase in the take up of parental leave is estimated to lead to a temporary loss of production for companies, which is discussed in the box below.

The increase in take up of parental leave leads to employers having to consider whether to recruit more workers to temporarily replace workers who have taken parental leave. The cost of this recruitment process is estimated to be highest in option 3, with the cost being an additional €833 million compared to the baseline scenario. Around 62% of this cost is borne by the employers in the three countries in the cluster considered to fall significantly below the requirements of option 3 331 . This needs to be seen together with the lower needs to recruit more workers in the future, as companies are retaining workers who take parental leave.

This staff retention benefit is estimated to be largest in option 3, with an estimated benefit of €426 million to businesses. This is driven by more workers feeling able to take leave and return to their job, rather than having to leave their job to care for children. All the costs and benefits are recurring (they are incurred annually) and there are no one-off costs for reasonable adjustment. Around 60% of this benefit will be found in the countries in the cluster most affected by policy option 3 332 .

A higher parental leave uptake is also expected to reduce the number of days of absence workers take. The benefit businesses get from a reduction in absence from work is expected to reach up to € 566 million in Option 3 for the period 2015-2055. Around 72% of this benefit will be experienced in the countries of the cluster experiencing the largest legislative impact 333 .

As a result, the total cost on businesses for the period 2015-2055 of the introduction of legislation is of € 233 million in option 1, € 10.4 billion in option 2; and € 39.8 billion in option 3. The cost per company is slightly higher than in the baseline. It is estimated to be €110 in 2030 in the most generous option (Option 3). This is estimated to be below 0.4% of business' turnover in all countries in all policy options. Member States which fall significantly below the requirements 334 make up over 20% of the total cost in Option 3.

An assessment of the cost for micro-businesses shows that the cost of all policy options represents 1% or less than 1% of companies' total turnover in almost all Member States and very close to the level of cost under the baseline. Where the costs represent more than 1% (2% in Austria for example), the existing legislation incurs a similarly high cost to microbusinesses. Therefore the policy options do not disproportionately affect the performance of SMEs 335 . Some short-term negative effects cannot however be discarded as clarified above (e.g. those related to an increased take-up of parental leave).

Table 7: Estimated impact of parental leave options on companies, relative to the baseline (EU) 336

8.3.3 Impacts on Member States

The negative budgetary impacts are expected to be driven primarily by changes in payments made for parental leave benefits, and to a smaller degree, by increases in administrative burden under all options, driven by an increase in take up of parental leave.

In Options 2 and 3 changes in employment and pay will have budgetary impacts by altering benefit payments and taxes received. As employment, fertility rates and average earnings are estimated to increase, there is an expected positive impact on the tax received. All three Options increase the level of payment of benefits by the Central Governments (from € 1 million in Option 1 to € 13.1 billion in Option 3 over the 2015-2055 period) and Social Security Partners (from € 15 million in Option 1 to € 41.4 billion in Option 3 over the 2015-2055 period).

It is also expected that the level of healthcare provision will change under the options, as fathers who take parental leave are more supportive to their partners, which reduces the healthcare requirements for new mothers and children.

As a result, over the 2015-2055 period, the overall impact is expected to be positive in Option 2 (+ € 785million) and negative in Options 1 (- € 1.9 billion) and 3 (-€ 4.2 billion). In Option 2, Member States which fall significantly below the requirements 337  make up 98% of this positive impact. In Option 3, the Member States which fall significantly below the requirements 338 are responsible for the overall negative impact.

Table 8: Estimated impact of parental leave options on Member States, relative to the baseline (EU) 339

The macroeconomic effects of parental leave vary from one option to another. In the short term and the medium term, the improvements to parental leave provisions lead to an increase in the number of parents that participate in the labour force. The increase in the number of women in the active labour force is estimated to be larger than the increase in men for all options. In the longer term, there is, in addition, an increase in labour supply as a result of the higher fertility rate (as the additional children born approach working age). By 2050, the impact on the labour force ranges from 16 000 in Option 1 to 106 000 additional active individuals in Option 3. By 2050, the employment impact ranges from 5 000 to 134 000. The increases in employment are highest in Option 3.

The impact on GDP is estimated to be the highest in Option 3 (+ €112 billion over the 2015-2055 period). The positive impact on GDP is driven by an increase in real income due to pay (in Options 2 and 3) and an increase in employment, which lead to an increase in consumption. The positive impact on GDP is also due to an increase in the labour force, leading to an increase in the productive capacity of the Member State. The GDP impact of Option 2 is positive due to the high level of positive impact in Member States which fall somewhat below the requirements 340 . In Member States which meet the requirements 341 and those which fall significantly below 342 the impact is negative, with the latter cluster making up 81% of this negative impact. In Option 3, on the other hand, the Member States which fall significantly below the requirements 343 contribute to the positive impact of this option (at 37%, mainly due to assumptions around increased labour market participation by women as transferability is reduced).

Competitiveness would be marginally affected by all three options. While net exports would slightly decrease in 2030 (up to - €0.5 billion in Option 3), domestic prices would decrease by 0.01% in Option 3 in 2030 and not be affected by the other options.

Table 9: Estimated macro-economic impact of parental leave options

The parental leave options would accelerate the narrowing of the gender pay and employment gaps. The options will reduce the gender pay gap as female employment will increase at a higher rate than male employment, male working hours will decrease and women are more likely to retain the same job as they held before taking leave rather than potentially taking a new job requiring lower skills. The greatest impact on gender pay and employment gaps is estimated to be in option 3. In 2050, it is foreseen that with Option 1 female employment would increase by 7000 (compared to -2000 for male employment), in Option 2 by 46000 (compared to 18000 for male employment) and in Option 3 by 93000 (compared to 41000 for male employment).

8.3.4 Comparing the Options

Effectiveness: A non-legislative option is not expected to be very effective in improving work-life balance and women’s participation in the labour market, given the uncertainty around to which extent the policy guidance will be followed. Option 1 would have limited effectiveness in improving work-life balance and women’s participation in the labour market because the leave would still be designed in a way that favours take-up by second earners (mostly transferable and unpaid). Option 3 would be the most effective in facilitating women’s employment as the introduction of pay and the extension of non-transferability for the four-month period would support a balanced use of leave between parents. Option 2 would somewhat support fathers’ increased take-up of leave due to the payment of the non-transferable period, but would not have a strong impact on balancing the take-up of leave between women and men. Option 3 has the highest positive impact on employment and labour force participation.

Efficiency: Option 3 would entail the highest direct costs for employers and for central government budgets because of the payment of benefits and administrative burden. However, these costs would be largely counter-balanced for central governments by cost savings regarding unemployment benefits and healthcare, as well as increased tax revenue due to employment gains. Option 1 has the lowest costs for companies and Option 2 has a small positive impact on central governments. The cost of implementing the non-legislative Option would depend on the implementation by Member States and/or social partners.

Coherence: All options, to a different extent, would facilitate the exercise of the rights recognised in Article 33 of the Charter of Fundamental Rights, which specifically refers to the reconciliation of family and professional life and states that everyone shall have the right to (…) parental leave. In addition, they would facilitate the exercise of the rights set out in the equality title of the Charter, particularly equality between women and men, which is to be ensured in all areas, including employment, work and pay (Article 23); the prohibition of discrimination based on sex (Article 21); and the rights of children to such protection and care as is necessary for their well-being (Article 24). They would also enhance the rights of children to be cared for by their two parents. There are no negative impacts on other Fundamental Rights.

Option 3 is identified as the preferred option for parental leave. As Option 3 provides for an individual entitlement to remunerated leave for the full four-month period that is non-transferable between parents, it entails much higher take-up by men and hence will have the highest positive impact on female employment. Significantly increasing the length of the non-transferable period has considerable benefits in terms of increased household incomes and individual well-being (for fathers, mothers and children). Option 3 is more costly for companies and Central Governments than Options 1 and 2, but its higher costs remain modest in relative terms (110€ per company in 2030 and 150€ in 2050). In addition, it has much larger effects in terms of labour market participation as well as income security for workers taking leave. Furthermore, Option 3 also has much higher positive macro-economic effects. This Option hence appears to rank higher than the other parental leave options assessed.

8.4 Carers’ leave

The non-legislative option would not require Member States to change their national legislation to introduce carers’ leave or change the existing provisions. For Option 1, some Member States 346 would need to introduce or extend carers’ leave to the 12-week minimum requirement. Some Member States would need to change their legal frameworks to provide carers’ leave on a flexible basis 347 . For Option 2, some Member States 348 would need to introduce or extend carers’ leave to the 4-week minimum requirement, and some Member States 349 would need to introduce or raise the allowance of carers’ leave to sick-pay level. The same Member States would need to change their legal frameworks to provide carers’ leave on a flexible basis as Option 1. For Option 3, a few Member States 350 would need to change their legal frameworks in order to provide a short term leave of 5 days/year to care for a sick child or dependent relative, and some Member States would need to adapt their legal frameworks to ensure that the leave is paid at sick-pay level 351 .

8.4.1 Impacts on individuals

Option 1 would improve the work-life balance situation of employees who are caring for elderly, disabled or ill family members (children, parents and spouses), and would help to reduce workers’ stress and well-being. It would allow them to maintain an attachment to their jobs during periods of caring responsibilities. As women are more likely than men to provide informal care or to be the primary caregivers, Option 1 would allow in particular women to remain in employment, rather than dropping out of the labour market. The flexible design of leave in this option would encourage men to use (part of) the leave. However, as women are more likely than men to take unpaid leave, Option 1 can have negative gendered impacts: if women are the main users of carers’ leave, this can weaken their position in the labour market in terms of employability, pay or career developments, as they would be more likely than men to take a career break due to care.

Option 2 would similarly support work-life balance for workers with dependent family members. It would also strengthen the attachment of workers’ to their jobs, preventing them from dropping out of the labour market during periods of caring responsibilities. As it is paid Option 2 would incentivise more first earners (generally men) to make use of the entitlement. Similarly to Option 1, the flexibility present in Option 2 would give possibilities for workers to choose when and how much time off they need to care for a dependant or ill relative, for instance making arrangements for institutional care, or spending time with a terminally ill relative, while staying in employment.

Option 3 would support reconciliation of private and professional life by providing workers with additional flexibility, allowing them to take a short period of time off in order to tend to children or ill/dependent relatives and/or accompany them to medical appointments. This option could therefore reduce workers’ stress and improve well-being. The relatively short period of leave would avoid large breaks in the workers’ career. That being said, the short period of leave might not be sufficient for workers with disabled or dependent relatives who are in need of more intensive attention, and therefore the provision of formal care services in addition to this leave would be crucial for work-life balance.

By facilitating women’s employment, all options could indirectly contribute to the reduction of poverty among women and their families, given that dual-earner households are at a lower risk of poverty 352 . Options 2 and 3 additionally provide an income replacement during the period of leave, which could be beneficial in stabilising household income particularly for low income households. That being said, given that the period of leave is short for Option 3, the fact that the leave is paid is unlikely to have a strong impact on reducing poverty risk.

The non-legislative Option is expected to have some positive impacts on individuals similar to the above described. The significance of these impacts would depend on how close the implementation by Member States and/or social partners of the considered policy guidance would be to the bidding measures presented in options 1 to 3.

8.4.2 Impacts on companies

The non-legislative Option and Option 1, would entail costs for companies in terms of a temporary loss of production for individuals who take carers’ leave, and existing carers’ who take longer carers’ leave (where employers choose to replace individuals taking carers’ leave), The cost of recruiting staff to replace existing staff on carers’ leave (where they are replaced) also needs to be considered, as well as the administrative burden to process carers’ leave applications. That being said, companies would benefit from enhanced satisfaction and longer-term productivity at work of employees with caring responsibilities. Moreover, if employees can take a period of leave and then return to work, instead of dropping out of employment, there is increased retention of skilled staff and therefore lower staff turnover and re-hiring costs which can translate into savings for employers. Carers’ leave can especially contribute to staff retention for employers who employ a large number of people in the age group 54-65 (especially women), as they are the most likely group of employees to need to look after an ill or disabled relative (an aged relative or a partner), which puts their employment at risk. These benefits substantially offset many of the costs for Option 1, however the total impact of this option on companies remains negative (- € 304 million for the period 2015-2055).

Option 2 would similarly entail costs for companies in terms of a temporary loss of production, although for a much shorter period. It would also require some increase in replacement costs, although less than Option 1 because of the substantially shorter period. As Option 2 requires the payment of the benefit at sick-pay level, this option would also entail some costs for companies in terms of benefit payments, though this would depend on the financing arrangements for this leave. Where businesses are responsible for paying for carers’ leave (e.g., Spain and Italy), there is an increase in their burden in paying for carers’ leave (€ 390 million in Option 2 for the whole EU for the period 2015-2055). Companies would however similarly benefit from enhanced satisfaction and productivity of work for employers with caring responsibilities, as well as increased retention of staff and reduced staff turnover and re-hiring costs.

Option 3 would entail some costs for employers due to payment of benefits (depending on how the leave is financed), as well as some costs due to a temporary loss production. There would be benefits in terms of enhanced productivity and retention of workers with caring responsibilities, lower staff turnover and reduced hiring costs.

Overall, the estimates suggest that Option 1 would have a negative impact (- € 304 million) and Options 2 and 3 a positive impact on businesses (respectively + € 295 million and + € 1078 million) as savings linked to staff retention are significantly higher for those two options. Member States which fall significantly under the requirements 353 make up 14% of the benefit to employers in Option 2 and 4% in Option 3. While, in 2050 Options 1 and 2 would lead to an additional cost per company of € 2 and € 1 relative to the baseline, Option 3 would leave to a net benefit of € 5. In all cases, the cost is estimated to be below 0.2% of the average business turnover in all countries.

The estimates of the costs as a percentage of turnover for microbusinesses (with fewer than 10 employees) suggest that the costs on microbusinesses are at a low level of the level of turnover in all countries (equal or below 0.8% of microbusiness turnover) 354 and very close to the level of cost under the baseline. Therefore the policy options do not disproportionately affect the performance of SMEs. Some short-term negative effects may occur, however, triggered by a temporary loss of production due to an increased take up of carers' leave.

Table 10: Estimated impact of carers’ leave options on companies, relative to the baseline (EU) 355

8.4.3 Impacts on Member States

The budgetary impact on Central Governments is driven in part by changes in employment. In view of anticipated demographic ageing, all options would facilitate that increasing numbers of workers are retained in employment once they enter the ages when they face caring responsibilities towards elderly relatives. This in turn would be expected to positively contribute to tax revenue. The budgetary impact is also driven by payments made for carers’ leave benefits, in the cases of Options 2 and 3 (depending on how the leave is financed).

Option 2 is the most costly option in terms of benefit payments (€ 1 249 million for the central government and € 4073 million for the social security partners for the period 2015-2055), but it also has the greatest positive impact of the change in tax received (€ 27 174 million for the same period). The largest decrease in unemployment benefits is also estimated to be in Option 2 (€2.4 billion). Around 86% of this benefit is concentrated in the cluster of 13 countries which are considered to fall somewhat below the requirements of this option 356 . The introduction of paid carers’ leave also creates additional administrative burden, linked to the processing of payments and an increase in the take up of carers’ leave, as well as the need to track a ‘bank’ of leave throughout a worker’s career. This administrative burden on the Central Government is highest in Options 2 and 3 (€ 404 million under both options for the period 2015-2055). Improved worker health, particularly reductions in stress-related illnesses, also has an impact as it reduces the costs for health insurance.

The total impact on Central Governments and social security providers is estimated to be a benefit of €23.8 billion under Option 2 (67% of this is accounted for in Member States which fall somewhat below the requirements 357 and 2% in Member States which fall significantly below the requirements 358 ), nearly €21 billion in option 3 (with a similar impact of the different clusters of Member States), and a negative impact of - €991 million in option 1.

Table 11: Estimated impact of carers’ leave options on Member States, relative to the baseline (EU) 359

Carers' leave options have different macro-economic impacts. While Option 1 has a negative impact on GDP (- € 0.3 billion), Options 2 and 3 have a significantly positive one (+ € 56.6 billion and + € 45.6 billion respectively). The changes in GDP are driven by changes in employment and labour market participation, along with associated increases in productivity. In Option 2, 73% of this impact is driven by the Member States which fall somewhat below the requirements 360 and only 3% by Member States which fall significantly below the requirements 361 . The situation is similar in Option 3 with 68% for the former cluster 362 of Member States and 2% for the latter 363 . There is an overall increase in net exports, as higher production capacity encourages firms to reduce prices and increase production, with some of the additional production exported.

There is an increase in the size of the labour force as a direct result of all the options. The provision of a period of carers' leave prevents some individuals from falling out of the labour market to care for their family members, so they can remain in the same job rather than having to leave and possibly try to return at a later date. 364 This is through both the provision of leave in options 1 and through the paying of leave in Options 2 and 3, which encourage a higher number of individuals to remain in the labour market. This is particularly important for female workers, especially older female workers. In 2050 the improved carers’ leave provisions lead to an increase in labour force participation that range from 1000 in Option 1 to 49 000 in Option 2.

In 2050 the estimated increase in employment ranges from 6000 in Option 1 to 76 000 in Option 2. The increase in employment will also lead to an increase in the amount of tax received. The options are also expected to increase real incomes. In all options, this is driven by the increase in employment; the introduction of paid carers’ leave in options 2 and 3 also drive increases in real income.

Competitiveness would be marginally affected by all three carer's leave options. Net exports would decrease by a maximum of € 0.2 billion in Option 3 in 2050. While in 2030 none of the three options would impact domestic prices, Option 2 leads to the highest decrease in domestic prices in 2050 (-0.3%).

Table 12: Estimated macro-economic impact of carers' leave options

Although the carers’ leave options provide benefits to both men and women in the labour market, they would affect women to a greater degree. Female labour market participation, employment and earnings estimates all improve by a larger proportion than for men, so they support a narrowing of the gender employment gap and of the gender pay gap (as female earnings increase faster than male earnings). In 2050, it is foreseen that with Option 1 female employment would increase by 4000 (compared to 2000 for male employment), in Option 2 by 47000 (compared to 29000 for male employment) and in Option 3 by 30000 (compared to 22000 for male employment).

8.4.4 Comparing the Options

Effectiveness: Option 1 has a low impact on labour force participation and employment. Option 2 has the highest impact on labour force participation and overall employment, closely followed by Option 3. The non-legislative option's effectiveness in improving work-life balance and women’s participation in the labour market would depend on its implementation but as a non-binding option, it is expected to be less effective.

Efficiency: Option 1 is the only option to have a negative impact on companies. This is largely due to lost production during the period of leave and higher replacement costs. This Option is also the only option to have a negative impact on central governments. Options 2 and 3 have comparable positive impacts on companies and central governments and are therefore similarly cost-effective.

Coherence: All options would facilitate the exercise of the rights recognised in Article 33 of the Charter of Fundamental Rights, which specifically refers to the reconciliation of family and professional life. Options 2 and Options 3 would have the highest impact given that income replacement during the leave period would allow them the financial support to effectively exercise the right in practice.

Both Options 2 and 3 are expected to have high positive impacts on individuals, enabling them to take a short period of leave to care for their dependent relatives with a limited earnings loss. The quantitative assessment for both options reveals a neutral impact when estimated per company in 2050 and a high positive impact on Central Governments. Option 2 has slightly more positive macro-economic impacts than Option 3. Option 2 may however entail a higher administrative burden for companies/central governments than Option 3, given the need to track a ‘bank’ of leave throughout a worker’s career. Option 3 therefore appears to rank slightly higher in efficiency than the other carers’ leave options assessed and is therefore identified as the preferred option.

In order to further increase the efficiency of Option 3, it would be considered to limit the scope of the entitlement to 5 days per year per worker (and not per dependent relative). This would limit the disruption and complexity due to introducing such as measure for companies, as well as possibly reduce its costs.

1.1.Flexible working arrangements

The non-legislative option would not require Member States to change their national legislation to change the existing provisions. Option 1 would require a majority of Member States 366 to introduce a right for parents of children up to 12 and carers to request flexibility in place of work. Option 2 would require a majority of Member States 367 to introduce a right for parents and almost all Member States 368 for carers to request flexibility in schedule. Option 3 would in addition to the changes required by Option 1 and 2, also require many Member States 369 to introduce a right for parents many Member States 370 for carers to request reduced working hours.

8.5.1 Impacts on individuals

Compared to the baseline, all three options would encourage employees to make a request, as even if the employer is under no obligation to grant the requested change, he/she will neverthless need to give it due consideration. Therefore, it would allow, where it is mutually convenient for the employee and the employer, to agree on changes to the place of work (in Option 1), working schedules (in Option 2) or a reduction in working hours (in Option 3) for a set period of time. 371 Greater use of flexible work arrangements would have a positive impact in better balancing work and family life. Individuals are expected to benefit as their quality of life improves. Additionally, when men use flexible working arrangements, this leads to better sharing of unpaid work between men and women (although the percentage of employed men who reduce their working hours to take care for the child is generally very small 372 ).

In Option 1 and 2 flexibility in working schedule and place of work, when granted by the employer, would not lead to a loss in hours worked. In Option 3, the additional right to request reduced working hours, in contrast, would entail reduced pay and pension contributions associated to the reduction in hours worked for workers making such a request, so their income would be reduced accordingly. However, the availability of rights to request reduced working hours could potentially increase women's pay per hour among women part-timers, if women who wish to work reduced hours would be able to do so in a wider range of occupations, also including higher-paid occupations. While there are concerns that such arrangements would continue to be used disproportionately by women, if men were to make use of such rights, then more women would be able to continue in full-time work.

Compared to the baseline, Options 1 and 2 would lead to improved employees' efficiency, derived from reduced interruptions at work and better concentration when carrying out certain tasks, as well as reduced commuting time, if flexibility in working schedule and place of work is enhanced. As a result, employees with caring responsibilities who would have otherwise dropped out of employment, or reduced their hours of work, can remain in employment. 373  

Option 3 would also facilitate a reduction in working hours for a set period of time, thus giving more time for family responsibilities. The direct impacts are a negative financial impact for workers who choose to reduce their hours (reduced pay and pension contributions) and a positive impact in so far as it would facilitate remaining in the same job instead of changing to a different job with shorter hours (as part-time jobs are often lower paid). The indirect impact is a more limited access to training during the spell of part-time and lesser possibilities for career progression 374 .

The impact of all three options as well as the non-legislative Option on the gender gap in hours and earnings will depend on whether men would start requesting, and being granted, reductions in hours worked for reasons of care. Currently, women are much more likely than men to work part-time for care reasons, which contributes to women maintaining the bulk of caring responsibilities, as well as women’s lower income. 375  

The take up of flexible working arrangements by men would lead to an increase in the amount of unpaid work men carry out each week, which in turn reduces the amount of time women spend on unpaid work and increases their availability for labour market participation.

The impacts of flexible working arrangements on poverty are mixed. By facilitating women’s employment, all options could contribute to the reduction of poverty among some women and their families, given that dual-earner households are at a lower risk of poverty 376 . That being said, as women would more likely make use of part-time work solutions, there is a risk that the above options could also result in women’s reduced earnings as well as lower build-up of pension contributions, leading to lower pensions and increased poverty risk in old age. Thus, the promotion of a more balanced take-up between women and men as parents and caregivers remains important. Moreover, measures to facilitate the transition to full-time work, as well as ensuring adequate minimum pensions, can help to mitigate associated poverty risks.

8.5.2 Impacts on companies

The impacts of the flexible working arrangements options on companies are mixed. There will be benefits to companies, as employees using flexible working arrangements are more likely to remain in the same job, which reduces recruitment costs, and are expected to be less absent from work due to sickness. The costs for companies will result from an administrative burden to process applications in all options, and in addition under Option 3 to , a potential loss of production for employees reducing their working hours as well as an adjustment cost when having to adjust the workload or to assign workers to different jobs.

In Option 1 there is also a potential adjustment cost for companies when employees are allowed to work from home or another remote location as organisational changes are involved. Where individuals take up arrangements to work at a different geographic location, employers potentially have adjustment costs to ensure that workers can carry out their work elsewhere 377 . However, many employers who are able to offer homeworking will already provide this equipment for employees (for example many workers in offices already use laptop computers as standard) or workers will just use their own equipment. It has been estimated that this will be the case for 50% of employers; however it could be more in practice. Moreover, employers would not be obliged to grant the request for remote working, so there would be no risk to disproportionately burdening businesses.

In Option 2 there is also a potential adjustment cost for companies when employees request to change their working schedule, as organisational changes are also involved. However, they can be more easily accommodated, in particular, when the workflow is not immediately dependent on consumer demand. 378

The benefit to employers through increased retention are assumed to reach € 33.1 billion in Option 1, € 59.4 billion in Option 2 and € 98.2 billion in Option 3 for the same period. For Option 3, which entails the right to request reduced working hours, the costs due to lost production are estimated to €129.8 billion for the period 2015-2055. This assumes a very high level of demand for and accommodation of flexible working arrangements, since employers can, of course, refuse requests for flexible working, particularly where it would cause a cost to the company, so the actual costs would likely be significantly lower.

The total impact on businesses of the introduction of legislation is estimated to be a benefit of € 3.1 billion in Option 1, € 11.7 billion in Option 2 and a cost of € 126.4 billion in Option 3 due to the impact of the lost production linked to the right to request reduced working hours. In Option 3, Member States which fall significantly below the requirements 379 account for 25% of this cost.

The impact on businesses is similar for SMEs as it is for large employers, as the costs and benefits relate to the number of individuals taking flexible working arrangements and SMEs will be able to refuse if flexible working is not workable for them. The estimates of the costs as a percentage of turnover for microbusinesses (with fewer than 10 employees) show that the costs of the policy options on microbusinesses is a low level of the level of turnover (equal or less than 1% except in NL where it is 1.6% ) and very close to the level of cost under the baseline. Therefore the policy options do not disproportionately affect the performance of SMEs 380 . In addition, OECD evidence shows that employees in small firms (with 10 workers or less) have relatively more access to certain flexible working arrangements. The closer interpersonal links that employees in small firms often develop and the associated level of trust seem to facilitate greater workplace responsiveness to worker needs, with benefits for the SMEs. 381  

Table 13: Estimated impact of flexible work arrangements options on companies, relative to the baseline (EU) 382

8.5.3 Impacts on Member States

The non-legislative option and the three legislative options have a positive budgetary impact on central governments, which ranges up to + € 309.1 billion in Option 3. Member States which fall significantly below the requirements 383 make up 23% of this positive impact. The budgetary impact is driven by changes in employment and pay, which will alter benefit payments and taxes received. A benefit is estimated for all options, which is largely driven by changes in tax receipts. More flexible working arrangements are expected to lead to: an increase in labour market participation, a reduction in hours worked and an increase in productivity. It is also expected that individuals who use flexible working arrangements are less likely to require the same volume of health care.

Table 14: Estimated impact of flexible work arrangements options on Member States, relative to the baseline (EU) 384

The macro-economic impacts for flexible working arrangements options are high. The positive GDP effects are much larger in magnitude than the other options in relation to leave that were modelled. This is because the flexible work arrangements apply to a larger number of individuals and take up is higher than under the other options. The quantitative assessment shows that all types of flexible working arrangements (homeworking, flexible schedules and reduced working hours) would have significant positive impacts on GDP. The impact on GDP is estimated to be between € 273.2 billion (Option 2) and € 653.1 billion (Option 3) over the 2015-2055 period. In Option 3, the Member States which fall significantly below the requirements 385 make up 23% of the positive GDP impact.

All three options lead to a boost in competitiveness, as increases in labour force participation puts downwards pressure on wages and prices and increases the potential productive capacity of the economy, leading to an increase in net exports (€ 9.9 billion in Option 3 in 2050) and a decrease in domestic prices (-0.63% in Option 3 in 2050).

Table 15: Estimated macro-economic impact of flexible working arrangements options

Although the flexible working arrangement options provide benefits to both men and women in the labour market, they would affect women to a greater degree. Female labour market participation, employment and earnings estimates all improve by a larger proportion than for men, so they support a narrowing of the gender employment gap and of the gender pay gap (as female earnings increase faster than male earnings). In 2050, it is foreseen that with Option 3 female employment would increase by 942000 (compared to 450000 for male employment).

8.5.4 Comparing the Options

Effectiveness: a non-legislative option should improve work-life balance and women’s participation in the labour market but, giving its non-binding character, it is expected to be less effective than Options 1 to 3. Options 1 and 2 would be less effective in improving work-life balance and women’s participation in the labour market than Option 3 because they only entail one type of flexible working arrangement. They would also have a smaller impact on employment than Option 3.

Efficiency: Options 1 and 2 have a positive impact on companies due to the retention of employees and the avoided costs due to absence from work. However, these two Options do not entail a right to request reduced working hours, which has been shown above to have a strong impact on parents and carers' work-life balance. While Option 3 would bring the highest costs for companies, it will also bring the highest benefits for the States thanks to a high rise in employment and tax revenues.

Finally, while environmental impacts appear to be of marginal relevance overall, an impact on the environment can be reasonably expected from Options 1 and 3 which entail measures leading to more employees changing their place of work who, as result, would not commute or would commute shorter distances on given days. The impact would be positive, albeit marginal. The other possible measures under consideration are not expected to raise positive or negative impacts on the environment.

Coherence: Due to more flexibility in how to organize the working hours or the place of work, all the options would facilitate the exercise of the rights recognised in Article 33 of the Charter of Fundamental Rights, which specifically refers to the reconciliation of family and professional life.

On the basis of the analysis above, Option 3 has been identified as the preferred option. While the quantitative analysis showed high positive impacts on female employment and central governments for all legislative options, they are the highest in Option 3. This is especially the case for the increase in employment which is foreseen to be comparable in Options 1 and 2 (14 000 and 15 000 in 2030) and much higher in Option 3 (1 000 000 in 2030) thanks to the right to request reduced working hours it entails. In consequence Option 3 is expected to lead to a large increase in tax revenues for Member States. Although Option 3 has the highest cost for companies, when disaggregated the cost represents only 118 € per company in 2030 and 597 € per company in 2050. There can be mixed impacts on individuals, particularly in the use of part-time work, which is why it would be important to accompany these measures with awareness-raising and monitoring to facilitate improved gender balance in the take-up of such arrangements.

1.2.Impact of the Combination of preferred options

The preferred combination of options is presented in the following table. It gathers all options considered the most effective, efficient and coherent for each policy area assessed above. The following table presents a summary of the legal gap analysis for the preferred options in the areas of paternity leave, parental leave, carers' leave and flexible working arrangements. A more detailed legal gap analysis can be found in Annex 2 of the supporting study.

Legal Gap analaysis of Combination of preferred options 387

The qualitative analysis of the impact of the preferred options is described in the previous sections. A quantitative assessment of the cost and benefits of the combination of preferred options is presented in the table below.

Table 16: Expected impact of the combination of preferred options

The quantitative analysis shows that the combination of preferred options has a positive impact on GDP (+ € 840 billion, NPV 2015-2055), This positive impact is spread among a large group of evenly geographically distributed Member States with 11 Member States representing each in absolute terms from 1 to 10% of the overall EU impact. The combination also has an positive impact on employment (+ 1.6 million in 2050) and the labour force (+ 1.4 million in 2050). Real incomes are expected to increase by 0.52% in 2050.

The combination represents a cost for companies (€172.7 billion in NPV 2015-2055 for the EU). The impact is also widespread among the Member States with 15 Member States representing each in absolute terms from 1 to 10% of the overall EU impact. However, the majority of this cost is driven by the flexible working arrangements option which assumes a very high level of demand for and accommodation of flexible working arrangements although employers can refuse requests for flexible working, particularly where it would cause a cost to the company. The total cost for companies of the combination could hence be significantly lower.

It should also be taken into account that the preferred options of the combination have strong synergies and that the costs of the combination of preferred options could be lower than the sum of the individual costs for each option. For example some costs linked to the provision of an IT system to monitor leaves and flexible working arrangements could be combined for several preferred options and this would lead to a decrease in the burden for companies and Central governments. Conversely, in the long-term this initiative is expected to have wider positive impacts than those assessed in this report. Indeed, the measures presented above will facilitate reaching a gender-balanced sharing of care responsibilities between women and men, thereby giving women and men equal opportunities in the labour market.

As mentioned in the problem definition, this would have a series of positive impact that were not quantified in this report. These include increasing the pool of talents, increasing the motivation of workers, increasing the number of women in management positions, etc. The long-term effect of the positive impact on children's personal and cognitive development was also not quantified.

The legislative measures presented above for the paternity, parental, carers' leave and flexible working arrangement options will be accompanied by accompanying measures to enhance current efforts in these areas (including in the EU Semester and EU funding). The quantitative impact of these measures was not assessed because of the uncertainty surrounding their implementation. However, the non-legislative measures foreseen in the preferred option for maternity leave as well as complementary non-legislative measures to the other options are expected to have a positive impact on individuals, companies and Member States.

Moreover, as mentioned in section 5 on the policy objectives, this impact assessment does not cover all the drivers of the problem that will be addressed by this initiative. While formal care services and economic disincentives are two very relevant areas when tackling the problem of the underrepresentation of women in the labour market, measures in these areas were not assessed in this report. This is due to the limited EU competence in these areas. However, as mentioned in the Roadmap, the 'New Start' for work-life balance initiative is foreseen to be a comprehensive package of a wide range of legislative and policy measures. Considering the significant impact of formal care services and economic disincentives on the addressed problem, the initiative could build on the existing EU framework outlined in section 2.4 and foresee measures to enhance current efforts in these areas.

9.PROPORTIONALITY CHECK OF THE PREFERED OPTIONS AND COMBINATION

The combination of preferred options allows reaching the policy objective in a proportionate manner, focusing on promoting gender equality and increasing female labour market participation. It respects well-established national arrangements and the margin for Member States and social partners to determine the details of modalities of applying for leaves and flexible working arrangements.

As a consequence Member States would have to transpose the minimum standards into national law. This would entail financial and administrative costs for some Member States as well as businesses but would also bring substantial benefits, as explained above. In addition, these costs are minimised and commensurate with the objective to be achieved by the initiative.

In addition, the proposal does not set specific levels to be directly translated into national legislation but lays down only minimum standards. Member States who have more favourable rules for parents and caregivers already in place do not have to change their legislation and Member States may decide to introduce rules that go beyond the minimum standards set at EU level.

Moreover, many of the new provisions provided in this initiative are building upon existing provisions. For instance, according to Directive 2010/18/EU parental leave "should, in principle, be provided on a non-transferable basis" 388 . Similarly, carers' leave is based on the existing right to "time off from work (…) on grounds of force majeure for urgent family reasons in cases of sickness or accident making the immediate presence of the worker indispensable" 389 .

Therefore the planned Union action leaves as much scope for national decision as possible while achieving still satisfactorily the objectives of increasing female labour market participation. The principles of subsidiarity and proportionality are observed considering the size and nature of the identified problems.

10.MONITORING AND EVALUATION

To assess the effectiveness in achieving the general and specific objectives of the initiative as well as to address the lack of comprehensive data monitoring in the area, which, as mentioned above, hampers the efficiency of the current EU framework 390 , the following core progress indicators have been identified to monitor successful implementation. The core indicators chosen below are mainly derived from comparative data sources (Eurostat, OECD) but where indicators do not exist, information can be taken from national data. These indicators will be regularly monitored by the Commission and serve as the basis for the evaluation of the initiative. On the basis of the indicators listed below, the Commission could regularly report progress to other key EU institutions, including the European Parliament, Council, and European Economic and Social Committee.

The table above presents the current level of the identified indicators. It is difficult to foresee how Member States' situation will evolve in relation to all those indicators. However, available data and relevant projections show that in the absence of EU level action, while some ongoing improvements in female labour market participation can be expected (following existing trends), the situation remains sub-optimal with a remaining average gender gap in male and female activity rates in the EU of around 9%, with gaps at or above 10% in 13 Member States (AT, CY, CZ, EL, HU, IE, IT, MT, NL, PL, RO, SK, UK). In Greece, the gap is projected to grow and remain at over 15%, it Italy it will remain close to 20% and in Malta it will exceed 25%. No projections have been modelled regarding the other indicators, however, on the basis of the ICF analysis, not significant changes are expected.

As already mentioned in section 5, the objectives of this initiative are fully in line with broader EU-level initiatives such as the forthcoming European Pillar of Social Rights and the Europe 2020 Strategy. In this context, this initiative will be monitored in light of the targets determined under these initiatives, notably the objective of achieving the 75% of the 20-64 years old to be employed. This initiative will also propose non-legislative measures, including the announcement of the development of benchmarks on the take-up of the measures outlined above by women and men. These benchmarks could be used in the evaluation of the implementation of the initiative, in which the relevant operational arrangements to assess this implementation will be established.

11.GLOSSARY

Definitions:

Maternity Leave: Leave from work for mothers to be on the occasion of the birth of a child.

Paternity Leave: Leave from work for fathers to be taken on the occasion of the birth of a child.

Parental Leave: Leave from work on the grounds of the birth or adoption of a child to take care of that child;

Carers' Leave: Leave from work for workers providing personal care or support in case of a serious illness or dependency of a relative;

Flexible Working Arrangements: The possibility for workers to adjust their working patterns, including through remote working arrangements, flexible working schedules and reduction in working hours.

Country Codes:

European Union (EU)

Annexes

Annex 1. Procedural information

 Organisation and timing

Following the withdrawal of the Commission’s proposal to amend the Maternity Leave Directive in July 2015, the Commission announced its intention to prepare a new initiative that would address the issue in a broader context. The Commission published a Roadmap 391 for a ‘New Start Initiative for Working Parents and Carers’ in August 2015.

A Commission inter-service steering group (ISG), jointly chaired by the Secretariat-General was subsequently established in September 2015 for preparing this initiative. The following DGs and services were invited to the inter-service group included: Legal Service (SJ), Economic and Financial Affairs (ECFIN), Industry, Entrepreneurship and SMEs (GROW), Education and Culture (EAC), Regional and Urban Policy (REGIO), Health and Food Safety (SANTE) and Migration and Home affairs (HOME). The ISG met 4 times in the period from September 2015 to December 2016 and an additional written consultation before the re-submission to the RSB was held in February 2017.

During this period, the Commission undertook a two-stage consultation with the EU-social partners between November 2015-January 2016 and July 2016-September 2016. A broad public consultation also took place between November 2015 and February 2016. The Advisory Committee of Equal Opportunities between Women and Men was also invited to provide an opinion on the initiative, and the Committee presented their views in a Committee meeting on 8 December 2016 (see Annex 2 on stakeholder views).

The Commission has announced that it will present the initiative in its 2017 Work Programme as a related initiative within the framework of the Social Pillar.

Consultation of the Regulatory Scrutiny Board

The Regulatory Scrutiny Board first delivered a negative opinion in January 2017 and then a positive opinion with reservation in March 2017. The tables below shows how this report takes into account the RSB comments.

Evidence and external expertise used

The Commission awarded a contract to ICF international for the analysis of the costs and benefits of possible EU measures to facilitate work-life balance for parents and caregivers.

The Commission additionally drew on its existing contracts to gather evidence that was used to support this impact assessment. This included:

A thematic report prepared by the European Social Policy Network on work-life balance measures for people with dependent relatives. A synthesis report, summarising the key findings, has been published along with in-depth country reports on the topic.

A review of the available literature on the costs and benefits of work-life balance measures was undertaken by researchers at the London School of Economics. The review has been published.

In addition, the European Network of Equality Bodies prepared a survey of their members on reported incidents of workplace discrimination and dismissals related to parenthood.

Annex 2. Stakeholder consultation

Several steps have been taken to collect stakeholders views, they are summarised below :

Summary of the responses of the EU social partners

In line with the treaty, the Commission consulted the EU social partners in a two-phase consultation process. A first-phase consultation with the social partners was held between November 2015 and January 2016, and concerned the possible direction of EU level legislative action in the area of work-life balance and female employment. A second-stage social partner consultation took place between July and September 2016, which requested their views on a range of envisaged EU-level measures in the areas of leaves, flexible working arrangements, formal care services, and measures to reduce tax-benefit disincentives.

At cross-industry level, the trade unions that replied to the consultations were the European Trade Union Confederation (ETUC), Eurocadres and the European Confederation of Executives and Managerial Staff (CEC) as well as the European Confederation of Independent Trade Unions (CESI). It should be noted that ETUC's reply also took into account the view of 10 ETUC sectorial trade union organisations.

On the side of the employers, replies to the consultations were sent by Businesseurope, the European Association of Craft, Small and Medium-sized Enterprises (UEAPME) and the European Centre of Employers and Enterprises providing Public Services (CEEP) as well as the Community of European Railway and Infrastructure Companies (CER), the Council of European Employers of the Metal, Engineering and Technology-Based Industries (CEEMET), the Council of European Municipalities and Regions (CEMR), the European Chemical Employers Group (ECEG), the Hotels, Restaurants and Cafés in Europe (HOTREC), the Performing Arts Employers' Associations League Europe (PEARLE), the Retail, Wholesale and International Trade Representation to the EU (EuroCommerce).

The social partners agreed, largely, with the Commission's objective of improving women's labour market participation and the Commission's description of the challenges related to work-life balance and female employment. The trade unions and the employers' organisations however did not agree on the case for further EU-level legislative action in the field and to enter into direct negotiations. While the trade unions were favourable to new measures, the employers argued against further action.

Possible improvements to the EU legal framework

The trade unions believed that the EU legal framework could be improved to provide strengthened protection against dismissal upon return from maternity leave. ETUC would additionally like to see an 18 weeks maternity leave guaranteed at full-pay level, coverage extended to all workers in atypical forms of employment and measures to facilitate breastfeading. They would also like to introduce payment and flexibility in uptake for parental leave and increase its non-transferable period and the maximum age of the child, as well as introduce EU legislation for paternity leave. CEC, Eurocadres and CESI were also in favour of improving the Parental leave directive and CEC and Eurocadreas supported the introduction of EU legislation for paternity leave. ETUC, CEC and Eurocadres appeared favourable towards carers' leave, but they cautioned that the latter should be designed so as not to reinforce expectations for women to provide informal care. ETUC considered that flexible working arrangements could be taken up at EU level whilst CEC, Eurocadres and CECI were favourable to measures to facilitate greater flexible working. CESI is particularly in favour of further EU-level legislative action in the areas of flexible working arrangements, part-time work, childcare and care for other family members.

Employers' organisations, on the other hand, found the current EU-legislative framework in the area of work-life balance to be sufficient. They pointed out to the primarily responsibility of the Member States and social partners in this area. Businesseurope, UEAPME, CEMR, HOTREC, CER, EuroCommerce and ECEG also warned that new EU-level legislation in this field could create high costs for employers, which could adversely affect competitiveness and worsen unemployment. Two organisations specifically referred to the disproportionate burdens that SMEs could face (HOTREC, ECEG).

Possible Non-legislative measures

Although the second-stage consultation was mainly focused on legislative measures, it also presented a series of possible avenues for EU non-legislative action. Most social partners, both trade unions and employers, were favourable to EU-level support in the area of childcare and long-term care services. CEEP, UEAPME, and CEEMET further insisted on the need for policy guidance to reduce tax-benefit disincentives for women to work and to change mindsets and tackle gender stereotypes related to care.

The social partners mentionned a wide range of non-legislative instruements they would like to see the EU put forward. These include strengthened EU policy guidance (including through the European Semester), EU-level financial support, clearer guidance to national/regional/local authorities on how existing EU funds can be used, further awareness-raising activities, promoting mutual learning and the exchange of good practices.

Summary of the results of the public consultation

The public consultation on possible action addressing the challenges of work-life balance faced by working parents and caregivers launched by DG Justice and Consumers together with DG Employment and Social Affairs run from 18 November 2015 to 17 February 2016. It received 785 contributions from across the EU including 229 from organisations and 557 from individuals. The table below shows the proportions of responses received from organisations by type of organisation. Non-Governmental organisations account for 28% of organisations having expressed their views, employers’ organisations for 17.5%, public authorities for 10.5% (including 10s Ministries at Member State level) and worker organisations for 9.7%. Responses were received from each EU Member State – the largest number of responses came from Belgium, followed by Germany, Italy, France and Portugal.

Table 1: Number of responses, by type of organisation

An overwhelming percentage of organisations (97.8%) and individuals (93.3%) agree or partially agree with the description of the challenges laid out in the background document 392 , while 85% of organisations and 89% of individuals agree that the list of policy areas to focus on (childcare, long-term care services, family-related leave arrangements for both women and men, flexible working arrangements for both women and men, tax-benefit systems that make work pay for both partners) is accurate and wholly or partially complete.

When asked about the possible policy measures to improve work-life balance and female labour market participation in their country, organisations responded that the highest priority is the availability of childcare, followed by improving the possibilities and/or incentives for men to take up caring responsibilities and work-life balance measures and improving the possibilities and/or incentives for parents and others with dependent family members to take up caring responsibilities and work-life balance measures. Individuals responded that the highest priority is improving the possibilities and/or incentives for parents and others with dependent family members to take up caring responsibilities and work-life balance measures, and improving the availability and affordability of childcare.

77% of respondents replied that there is a need for further EU-level action to address work-life balance challenges. While 61% of respondents support legislative options, 71% support policy guidance, 72% support the development of EU-level benchmarks, 73% support increased monitoring by the EU and an overwhelming 94% support the idea of more sharing of good practices.

As concerns the expected effectiveness of new EU-level measures in addressing the challenges of WLB, in each case there was large support for the measures, with them being labelled potentially effective or very effective.

Finally, when asked if the current EU-level funds and regulations are effective in supporting work-life balance, the majority of participants answered that they don't know (55%), followed by no (29.5%). The vast majority of participants (73%) of participants then responded that it would be useful for the EU to provide clearer guidance to national/regional/local authorities on how EU-funds could be used to financially support work-life balance.

Ten Central governments / ministries replied to the public consultation. Below are indications of their views on the need for further EU level action, as formulated in their responses to the public consultation:

o    In the view of MT, DE, NL and DK there is no need for further EU-level action nor to improve the EU-level legislative framework in order to address the challenges of work-life balance while CZ thinks there is a need for further EU level action but not to improve the EU level legislative framework.

o    RO, LV, FR, ES and EE are in favour of improving the EU legislative framework. For FR there is a need to have more convergence as regards parental leave and its condition of access/ type of beneficiary and length. ES and EE are in favour of a European paternity leave while RO thinks the EU legislative framework should be improved to increase the women's employment and better share responsibilities between women and men.

Other stakeholders views

a. European Parliament resolution on creating labour market conditions favourable for work-life balance 393

As a reaction to the roadmap and the public consultation on the New Start Initiative, as well as to prompt the Commission to step up its work in this field, the European Parliament adopted on 13 September 2016 a resolution on creating labour market conditions favourable for work-life balance. In general, the resolution welcomes the Commission's approach to work-life balance policies.

The resolution calls on Member States to put in place proactive policies designed to support women entering, returning to and staying in the labour market with stable and quality employment. It also calls for measures to facilitate a greater sharing of care responsibilities between women and men. The resolution further urges the Member States to ensure the availability of and universal access to affordable and high-quality early childhood education and care, as well as elderly and dependent care. It suggests increasing public expenditure on care services and incentivising employer contributions to care costs.

The resolution calls on the Commission to put forward a proposal in the context of the European Pillar of Social Rights, should an agreement between the social partners not be reached.

In terms of changes to EU-level legislation, the resolution calls for:

•a proposal for a revised Pregnant Workers (Maternity Leave Directive) aiming to prolong paid maternity leave with a diverse formula of payment to allow for accommodation of specific needs and traditions in different Member States;

•a Paternity Leave Directive with a minimum of a two-week fully paid leave.

•a Carers' Leave Directive as a supplement to the provision of affordable professional care and to enable workers to care for dependents.

•an implementation report for the Parental Leave Directive, as well as using the review clause to extend the minimum duration from four to six months, and to have the leave paid.

In terms of non-legislative measures, the resolution notably calls on the Commission to develop:

•initiatives with the Member States, such as a Child Guarantee, so that every child could have access to childcare (and free healthcare, free education, decent housing and adequate nutrition);

•specific targets on long-term care, with monitoring tools within the European Semester.

•quality standards for all care services.

•implementation of the Barcelona targets by 2020 and endorsement of the 2014 quality framework on early childhood education and care.

•making better use of the funds, calling also for a revision of the MFF for investments in social infrastructure.

b. Opinion of the Advisory committee on equal opportunities for women and men

The Advisory committee on equal opportunities for women and men was invited in December 2015 to provide an ad-hoc opinion on the new initiative to address the challenges of work-life balance faced by working parents and caregivers. The opinion was adopted in Januray 2017.

In its opinion, the Advisory committee highlighted a need for strong policies and legislation to create optimal conditions, incentives towards an equal contribution of women and men in care work and in paid economy. The committee highlighted the existence of discriminatory treatment of women and men in relation to parenthood, care provision and use of work-life balance measures.

The committee emphasised the need to take a comprehensive approach to address the growing needs in terms of elderly and dependent care, including quality public and private care services, improving working conditions and quality of formal home-based care services, providing a right to carers leave and allowing flexible working arrangements.

The committee noted that most young people – both women and men – wish to equally share their employment and family responsibilities based on equal partnership. It recalled the wishes of many fathers, i.e. to spend more time with their children, requires suitable governmental and company-based framework conditions. It set out best policies to ensure that women and men share care responsibilities include incentives for men to take leave to care for their children in the form of non-transferable rights and pay.

The committee acknowledged that gender stereotypes need to be challenged in order to encourage men to make use of work-life balance measures. Awareness raising campaigns at both EU and national level could help addressing unconscious gender bias.

The committee acknowledged that so far the sharing of care responsibilities and domestic tasks between women and men is not part of the corporate culture in many companies. For this to change, a multi-dimensional approach is required addressing gender stereotypes on who takes care of family and domestic tasks, addressing career opportunities and leadership positions for women, reducing the culture of presentism and avoiding blurring of work and private life with permanent availability. Knowledge should be developed on the costs and benefits of equal sharing of care responsibilities between women and men for companies, economies and societies.

In its Opinion, the committee sets out that Member States should go further than the Barcelona targets to increase childcare provision, by committing to provide childcare by 2020 to:

at least 50 per cent of children below 3 years of age, as well as possibly 33 per cent of children attending formal quality childcare arrangements for a duration of at least 30 hours per week;

at least 90 per cent of children between 3 and the compulsory school age. As well as possibly 90 per cent of children attending formal quality childcare arrangements for a duration of at least 30 hours per week; and

Focus could be put on out-of-school care services with the development of possible targets for children between 3 and the compulsory school age and school age children: a percentage of children attending before/after school formal arrangements271 (possibly 50% for the first age category and 90% for the second one); a percentage of children attending formal care arrangements during school holidays (possibly 50% for the first age category and 70% for the second one); a percentage of children accessing school meal services (possibly 90% for both age categories).

The committee also stressed that an EU benchmark on the quality of childcare provisions could operate alongside the Barcelona targets and could be in line with what is proposed in the EU-Quality Framework for Early Childhood Education and Care (2014) : "at least 90% of ECEC provision is of good quality or better as measured by the national or regional criteria”

Annex 3: Who is affected by the initiative and how?

As presented in Section 7, the impact of the initiative on a series of stakeholders was assessed. This annex provides an overview of how Member States and companies will be affected by the preferred combination of options, as identified in Section 8.

Member States

In order to implement the preferred combination of measures presented in Section 8, Member States will have to update their legislative framework. Considering on the basis of Directives 92/85/EEC on maternity leave and 2010/18/EC on parental leave that all Member States already have a system to manage family-related leaves, the change in parameters (such as non-transferability and pay) should not create the need to create a new system but only an increase in work-flow (assuming an increase in take-up) and hence the increase in administrative burden should be limited.

Companies

Companies will be required to make organisational changes, as more of their employees can be expected to make requests to use available measures. However, a number of the requirements already exist, and the proposal would provide stronger possibilities and incentives for employees to use them. As for new requirements, the organisational changes are of a broadly similar nature than existing ones and hence existing procedures (including IT systems to manage the request for leaves and flexible working arrangements) could be adapted.

Annex 4. Methodology for quantitative impact analysis

This impact assessment is based on ICF's and Cambridge Econometrics' "Study on the costs and benefits of possible EU measures to facilitate work-life balance for parents and care givers" This annex provides a brief description of the methodology used to estimate the quantitative impacts of the each policy option, as presented in Section 7. The used methodology is two-fold: a cost benefit analysis to assess the impact of the policy options on different stakeholders and macro-economic analysis based on the E3ME model.

1. Summary of Assumptions

The calculations of the macro-economic and socio-economic impacts of the introduction of potential measures to promote work life balance are underpinned by series of assumptions and calculations presented in this section of the annex. A brief description of some of the key assumptions and methodological steps is provided here.

The calculations include an assessment of the legal gap between the existing legislation in a Member State and the proposed legislation. The larger the gap between the existing legislation and the proposed legislation the larger the impact. This legal gap multiplier takes a value between zero and one, where one indicates that there is no provision available in Member State.

The calculations for most socio-economic impacts are based on the estimated take up and duration of leave options / flexible working arrangements under each option. In the baseline scenario, the take-up, average duration and value of benefit payments for leave options has been collected from desk research for each Member State, and not from administrative data (which does not exist in some Member States). Therefore, the number of people taking leave and the value of benefit payments may differ from administrative data. It is assumed that the rate of take-up of leave and flexible working arrangements remains constant in the baseline (in the absence of any change in Member State legislation). In the policy options, where there is assumed to be a change in take-up or duration, this is assumed to increase in a linear trend for a ten to twenty year period (depending on the measure), at which point the take up and duration is assumed to reach its new sustainable level.

The macro-economic impacts have been estimated using the E3ME model. The inputs into the model are assumed changes to labour market participation, employment, productivity, hours worked, earnings and population. These inputs have been estimated using findings from the existing literature, an assessment of the legal gap between the existing legislation and the proposed legislation and the take up rate and duration of different leave options. The results from the E3ME model show the level of employment, the level of unemployment (which subsequently provide estimates for the value of unemployment benefit payments), tax receipts, GDP, real incomes and the level of competitiveness within the EU. It should be noted that even when the legislation does not change in a Member State, the macro-economic results for that Member State can change. This is due to changes in the employment, income and competitiveness of other Member States in the EU.

The estimates of the value of benefit payments (unemployment benefit payments and payments for parents/carers whilst they are on leave) are not taken from administrative data. The estimated value of these payments per individual have been estimated from desk research conducted for each Member State which has gathered data on the level of benefit paid (usually as a share of previousl earnings), the value of average earnings in each year in each Member State and the estimated number of people receiving these benefits and duration they are paid for. These benefit payments are calculated in the same way in the baseline scenario and all subsequent policy options. Therefore the value of these benefit payments may differ from Member State administrative data.

In addition to assumptions around take-up some of the assumptions used, which most impact the macro-economic and socio-economic impact data are as follows:

Replacement of workers on leave – replacements rates are conditioned by the length of leave taken and it is generally assumed that workers taking short leave (less than 3 weeks) are no replaced. This has led to assumptions around replacement rates which stand at 33% for women and 11% men, as women tend to take longer leaves. In the parental leave options, where the length of male take-up is assumed to increase, these rates have been modified to reflect the detail of the policy option and its likely impact on the length of take-up of leave by men.

Assumptions and sensitivity analysis around productivity impact and loss of production – a range of assumptions was applied to loss of production to take account of the fact that – depending on the sector and the stage in the economy cycle, evidence shows that productive capacity is not always fully utilised. Assumptions of 100%, 80% and 50% of loss of production have therefore been calculated. Assumptions have also been made around increased productivity of more satisfied workers and the productivity of replacement workers –the former is higher with increased levels of satisfaction whereas replacement workers are assumed to be less productive than the worker on leave they are replacing.

Impact of stricter requlation on recruitment decisions – Literature, including from the OECD, has provided some evidence of the impact of stricter employment protection legislation on employment and labour market dynamism. An assumption has therefore been made to reduce the likely positive impact of measures on labour market participation to take account of these potential disincentive effects.

Assumptions on length of leave taken by women if men increase their take-up of leave (and length of leave taken) – assumptions around the length of leave taken by women have been shaped around the policy option being assessed. For example, in options which increase the non-transferabilty of parental leave, the length of take-up of women is assumed to reduce proportionate to the increase in the length of take-up by men. In other policy options, lower ratios are assumed.

Impact of offering paternity leave on the take-up of parental leave – based on literature from countries offering relatively generous paternity leave, it is assumed that there will be some leverage effect from the take-up of paternity leave to the take-up of parental leave (and its associated imacts).

Further detail on the assumptions underpinning the modelling (and the literature which has informed these) is presented in this Annex.

It is important to be clear that the purpose of macro-economic and socio-economic modelling is not to provide precise figures on likely costs and benefits arising of a policy option, but to provide an indicating of magnitude of impact, where relevant informed and modulated by a suitable sensitivity analysis.

The model has been able to estimate the macro-economic impacts of the policy options, and some socio-economic impacts and costs to businesses. However, it has not been able to comprehensively model all the potential impacts of the policy options. Where it has not been possible to quantify these impacts, a qualitative discussion has been provided. The impacts which have not been quantified are:

- Business profitability and turnover. Some of the costs and benefits to businesses have been captured. However, some of the policy options have an impact on the number of people employed, earnings and therefore spending. This will affect business profitability and turnover. It has not been possible to capture these impacts.

- Clear impacts on male and female labour market participation could also not be calculated, but it is indicated that many of the employment and associated benefits arise for women.

- Some of the policy options will promote a more equal sharing of unpaid work (such as housework, childcare and caring for the elderly). However, due to a lack of reliable evidence and data, it has not been possible to model or monetise this impact.

- The introduction of measures to promote work-life balance also aims to improve the well-being of European citizens. However, due to a lack of reliable evidence or measures of well-being and the monetary value of improvement in well-being, it has not been possible to estimate the value of this impact.

2. Cost Benefit Analysis

The methodology adopted to assess the direct and indirect costs and benefits of the different legislative (and non-legislative) policy options is Cost-Benefit Analysis (CBA).

The inherent difficulty of CBA is its more limited ability to value non-monetary impacts, such as the impact on gender equality or the potential impacts on family cohesion if both men and women are able to take care of children and ill, disabled or impaired family members. In this analysis, it has been tried to overcome this problem by evaluating the magnitude of these impacts where monetary values are not available.

In order to assess the impact of the different policy options, an extensive literature review was carried out to collect evidence of the impact of the policy options on a variety of indicators. The literature review sought to define and quantify relationships between key variables to help quantify differences in impacts between the options. Where no evidence was available in the literature, benchmark countries were selected and impacts were calculated using these baseline measures.

The evidence collected from the literature was used to form assumptions and calculations to estimate the impacts of the policy options. The assumptions used in the calculations are based on the evidence collected from the literature, but are not always the exact multipliers presented in the literature. This is because the literature does not provide evidence on each individual policy option; it instead provides evidence of the impact of having any leave, or flexible working arrangements compared to having none, or the effect of duration or pay. Therefore the direction of travel has been taken from the literature for some impacts, and the multipliers adjusted for each policy option. Detailed information on the assumptions used is presented in the annexes of the supporting study.

Additionally, as each Member State has different legislation currently in place, the nature and scale of the impact for each Member State is different. Therefore, effect of the policy option will be different in each Member State, depending on the legal gap assessment for each leave option in each Member State (see section 5 of the supporting study). The level of the impact has also been varied through time. It is likely that the impacts will increase over time as more people get used to the new legislation and begin to use it.

The impact on SMEs has been analysed by comparing the cost of the policy options to businesses with SME turnover in each sector. The demographic profile of the workforce in each sector has also been analysed, to show if there are sectors where workers are more likely to take advantage of the policy options, and if SMEs in these sectors are disproportionately affected by the policy options.

The Cost Benefit Analysis evaluated the impacts of the different policy options on the basis of the following parameters and calculating formulas:

Number of individuals taking leave

The number of individuals taking each type of leave has been estimated in a similar way for each type of leave. The assumptions consider that only employed individuals are eligible for each of the leave or flexible working arrangement options. This is summarised in the equation below.

For the carers and flexible working arrangement leave options, the equation is slightly different, as the equation applies to all individuals in the workforce, not just parents. The equation below summarises this:

Where:

TUc,g,t : the number of individuals taking each type of leave or flexible working arrangement option in each country and time period, disaggregated by gender;

Birthc,t : the number of live births in each country in each year;

Emplc,g,t : the number of people employed in each country in each time period, disaggregated by gender (taken from the E3ME modelling);

Popi.g.t : the population aged 15 to 64 in each country in each time period, disaggregated by gender (taken from the E3ME modelling);

Eligiblec,t : the percentage of the workforce who are eligible for each type of leave or flexible working arrangement; and

TURc,g,t : The take up rate for each type of leave and flexible working arrangement in each country, disaggregated by gender.

The take up rate in each country varies between different policy options, and is the main driver behind the differences in take up rate between the different policy options. The take up rate for each policy option is calculated using the following formula:

Where:

TURc,g,t : The take up rate for each type of leave and flexible working arrangement in each country, disaggregated by gender;

TURc,g,b,t : The take up rate for each type of leave and flexible working arrangement in each country in the baseline scenario, disaggregated by gender;

ΔTURg,po : the change in take up rate assumed for each policy option, disaggregated by gender; and

LGAc,g,t : A legal gap analysis multiplier for each country in each time period, disaggregated by gender. This multiplier takes a value between 0 and 1 based on the legal gap analysis, where 0 represents a country where the legislation already meets or exceeds the requirements of the policy option, and 1 represents a country where no measures are currently in place.

Leave duration

The average duration of leave arrangements (where appropriate) has been calculated in a similar way to the take up rate described above. It is based on the baseline duration of leave, the assumed change in leave duration and the legal gap analysis. This is summarised by the following equation:

LDc,g,t : The average duration of leave for each type of leave in each country, disaggregated by gender;

LDc,g,b,t : The average duration of leave in each country in the baseline scenario, disaggregated by gender;

ΔLDg,po : The change in duration assumed for each policy option, disaggregated by gender;

LGAc,g,t : A legal gap analysis multiplier for each country in each time period, disaggregated by gender. This multiplier takes a value between 0 and 1 based on the legal gap analysis, where 0 represents a country where the legislation already meets or exceeds the requirements of the policy option, and 1 represents a country where no measures are currently in place.

Administrative burden

The average cost of the administrative burden is calculated using the number of individuals taking leave or a flexible working arrangement under each policy option and an estimated administrative burden unit cost per person. The administrative burden falls on three separate groups: Central Government; Social Security partner organisations and employers.

In order to calculate the administrative burden cost, the following assumptions have been used:

For the assessment of administrative burden, the average hourly labour cost has been used to estimate the cost.

Where benefits are paid by the national government, an administration cost is attributed to the national government – if the government does not make a payment for a benefit no administration cost is attributed to the government. The same is true for social security providers. An administration cost is attributed to employers whenever an individual takes leave or flexible working arrangements. For governments the administration cost is assumed to be six hours (of average labour cost); for social security providers two hours (at average labour cost); and for employers it is assumed to be four hours (at average labour cost). These average costs in terms of hours are averages extrapolated from other studies 394 .

The following formula summarises the approach used to calculate the administrative burden for each group:

Where:

ABc,t,I : for total monetary value of administrative burden for each type of actor;

i : the different types of actors that can bear the administrative cost (government, social security and employers);

Admini :for number of hours spent on administrative tasks per person taking a leave option for different actors;

Labc,t : the average labour cost per hour in each country in each year; and

 TUc,g,t : The number of people taking each leave or flexible working arrangement option in each country each year (the total administrative burden uses the sum of male and female take up).

Benefit payments

The cost of the benefit payments made for each type of leave option was calculated using information on the take up of the different options, the average duration of leave and the average benefit payment made to individuals who take one of the leave options. As with the administrative burden, the benefit payments can fall on three separate groups: Central Government; Social Security partner organisations and employers.

Where:

BPc,t,I : the total value of benefit payments for each type of actor in each country in each year;  

i : the different types of actors that can bear the benefit cost (government, social security and employers);

ACc,t,I : the average daily cost of monetary benefits paid by actor in each country in each time period;  

LDc,t : the average duration of leave in days for each country in each policy option per year;

Birth for number of live births;

Eligible for percentage of mothers eligible for maternity leave (assumed as 100%); and

TUc,g,t : The number of people taking each leave or flexible working arrangement option in each country each year (the total administrative burden uses the sum of male and female take up).

Lost production

The costs of lost production for each of the policy options is assumed to fall on employers. The assumptions for the estimation of the value of lost production are:

Employees who are on leave are not contributing the output of the business, therefore they are not contributing to the businesses output. The duration of time an individual takes as leave multiplied by the level of output generated per worker in that period is estimated to be the level of lost production;

Some employees are replaced by employers to cover for the worker who is taking leave. The replacement rate is assumed to be 33% for women and 11% for men for all types of leave where individuals are replaced (maternity, parental and carers’ leave 395 ). The replacement rate for women is assumed to be higher as on average women take longer periods of leave, and are therefore more likely to be replaced temporarily;

Where a worker is replaced, the level of lost production is assumed to be zero;

Employers are assumed to make a saving for not paying the wages of individuals on leave that they do not replace. The saving is assumed to be wages. This has to be balanced against any commensurate loss in production.

The value of the lost production is calculated in three stages: the cost of the lost production is estimated, then the savings associated with not paying salaries is estimated. The cost of the lost production is estimated by subtracting the savings from not paying salaries from the cost of lost production. This is summarised in the equations below:

a) To calculate the costs to employers of absence from work:

b) To calculate savings associated with not paying salary:

c) To calculate the estimated net cost to businesses:

Where:

TLPc,t : the total lost production through individuals taking leave in each country in each time period;

RepRg : the level of replacement for individuals on leave, differentiated by gender;

LDc,g,t : the average leave duration for each country, in each time period, disaggregated by gender;

Labc,t : the average labour cost per hour in each country in each year;

TUc,g,t : The number of people taking each leave option in each country each year, disaggregated by gender;

SWc,t : The total savings through not having to pay salaries to workers on leave;

Earnc , t : The average earnings in each country in each time period; and

LPc,t : the net value of lost production to employers in each country in each time period.

Cost of recruiting replacement workers

Where employers replace staff who have taken leave, there is a cost to the recruitment process. The cost per person recruited to temporarily replace an individual on leave is estimated to be the equivalent of five days of output (35 hours). This is based on the time required to advertise, process applications and interview replacement workers. The costs are estimated to fall on businesses. The formula below summarises how the cost was estimated:

Where:

RRWc,t : the total cost for the recruitment of temporary replacement workers where employees are on leave in each country in each time period;

RepRg : the level of replacement for individuals on leave, differentiated by gender;

Labc,t : the average labour cost per hour in each country in each year; and

TUc,g,t : The number of people taking each leave option in each country each year, disaggregated by gender.

Retention of workers

The policy options encourage workers to remain in the same position when they complete their leave period. This is done either through legal protection or because employees feel that they can take leave therefore they are less likely to leave their job. This provides a monetary benefit to employers, as workers who remain with a business are estimated to be more productive than new recruits. The value of this benefit has been estimated using the formula below:

Where:

Retc,t : the monetary value to businesses of individuals remaining in their role in each country and each time period;

TUc,g,t : The number of individuals taking each type of leave or flexible working arrangements in each country in each time period, disaggregated by gender;

ΔRetpo : the change in the proportion of individuals who remain in their role as a result of each policy option; and

Earnc,t : the average earnings in each country and time period.

Absence from work

The policy options are predicted to have an impact on the number of days absent from work taken by workers who have access to leave options or flexible working arrangements. The cost of absence from work is assumed to be the value of the labour cost for the period a worker is absent (workers are assumed to work for seven hours per day). Therefore, the benefit of reducing absence from work is the additional time a worker spends at work due to having access to the leave options. The value of the change in absence from work is summarised in the formula below:

Where:

AFWc,t : the total benefit from the reduction in absence from work by country and time period;

ΔAFWpo : the change in the number of days absent for individuals taking leave or flexible working arrangements for each policy options;

Labc,t : the average labour cost per hour in each country in each year; and

TUc,g,t : The number of people taking each leave option or flexible working arrangement in each country each year, disaggregated by gender.

Reasonable adjustment

Some reasonable adjustment costs have been calculated. These are where businesses are required to spend money to adjust their premises or purchase equipment for their employees in line with the new policy options. The reasonable adjustment costs are only for the maternity leave and flexible working arrangements (working from home) policy options.

For the maternity leave option, there were two ways in which a reasonable adjustment cost was calculated. The first was associated with the rental cost of space for a separate breastfeeding room, and the second was for the purchase of a fridge for the breastfeeding room. It has been assumed that 50% of businesses would already comply with the legislation in the policy options. The estimate of these two costs is summarised in the formulas below:

a) The costs per annum associated with the cost of space for the room

Where:

Spacec,t : the total annual cost for employers of providing a room for mothers to breast feed in each country in each time period;

Rentc,t : the rental price per annum for 2.5 square meters in each country in each year. The rental prices are based on studies on 2012/13 prices and are inflated to reflect 2015 prices. This is a proxy measure for the value of space for all employers;

Businessest,t : the number of businesses in each country;

LGAc : A legal gap analysis multiplier for each country in each time period, disaggregated by gender. This multiplier takes a value between 0 and 1 based on the legal gap analysis, where 0 represents a country where the legislation already meets or exceeds the requirements of the policy option, and 1 represents a country where no measures are currently in place.

b) The costs associated with purchasing a fridge for the room

Where:

CFc : the total cost for employers of providing a fridge in each country;

Fridgec : the costs of a ‘table model’ fridge (i.e. no freezer, not built-in). The costs are based on a fridge from a Dutch consumer’s organisation (the median cost of a list of well-performing fridges 396 ). Costs were then adjusted for each Member State using the Eurostat price level index for household appliances 397 ;

Businessesc : the number of businesses in each country;

LGAc : A legal gap analysis multiplier for each country in each time period, disaggregated by gender. This multiplier takes a value between 0 and 1 based on the legal gap analysis, where 0 represents a country where the legislation already meets or exceeds the requirements of the policy option, and 1 represents a country where no measures are currently in place.

For the flexible working arrangements policy options, introducing working from home leads to costs for employers. The employer has to provide equipment and the means for an employee to work from home. This has been assumed to be the cost of purchasing a laptop computer and office chair for each additional worker who works from home. The cost of this adjustment for employers is assumed to continue every year until 2040, when the increase in home working due to the policy option is expected to plateau. The formula below summarises the method to calculate the cost to employers

Where:

RAc,t : the total cost for employers for providing a computer and chair for employers to work at home in each country in each time period;