Sep 11 paper 2 question 4(v)

[ST6_aspirant]

One of the solutions given to reduce cost of maternity and paternity benefit is that: if state provides a low maternity pay, company may pay that to beneficiary and reclaim it from state.

Question is why would that happen instead of state paying directly to the beneficiary?

 

[Mark Willder]

One of the solutions given to reduce cost of maternity and paternity benefit is that: if state provides a low maternity pay, company may pay that to beneficiary and reclaim it from state.

Question is why would that happen instead of state paying directly to the beneficiary?

The payment of maternity/paternity benefits differs between countries and so it may indeed be paid directly by the state.

However, this question is looking at the cost of maternity/paternity pay for the employer. If the state was paying these benefits directly, then there wouldn't be any employer costs for us to discuss.

Note that the solution is suggesting that we can cut costs by only paying the minimum benefit required by law ("the state may provide statutory maternity pay albeit at a low level. If so, the company may decide just to pay that").

It may then be possible to reclaim this cost from the state, but note that this is only given in brackets in the solution, so is only a secondary point.

Best wishes

Mark

 

[ST6_aspirant]

Understood. Many thanks!