The report says poorer parents end up with less time off
The UK's system of maternity and paternity leave is unfair to poorer mothers, detrimental to fathers and bad for the economy, a think-tank argues.
Fathers are excluded from the system and are "at best treated as an irrelevance", the Reform report says.
The report says poorer parents are hit twice, with less time off and lower maternity pay.
The government said its pay package is "generous and progressive" and fair to parents and employers.
The report says parental leave still encourages families to adopt a traditional division of responsibilities, because its maternity leave allowance is relatively high in comparison to other developed countries, but its paternity leave is low.
It encourages fathers to be absent, and mothers to become detached from the work-place, says the report.
It labels the system as "out of date and old-fashioned".
"In the current system fathers are treated as at best an irrelevance," the report's authors say.
But their most severe criticism relates to the gulf between the benefits received by mothers who are already well-off financially and poorer mothers.
Mothers earning £50,000 a year and taking six months' leave receive nearly £8,000 from the taxpayer, whereas a mother earning £12,000 would receive £4,500.
The report says despite "massive investment in a string of Sure Start initiatives and providing significant funds through tax credits and childcare vouchers, families still pay 70% of childcare costs".
More spending on benefits is not needed, but rather what is spent should be better targeted.
It said government initiatives such as tax credits or childcare vouchers did not help most parents using private childcare, and therefore many parents were still paying a high amount towards the cost.
Reform's chief economist, Patrick Nolan, said: "Britain's basic economic problem is low productivity and current family policy is a key reason for that.
"More flexible arrangements will help skilled parents keep in touch with the workplace and aid pace to the economic recovery."
The report makes a number of recommendations, including replacing statutory maternity and paternity pay with a flat rate of £5,000 payable over six months.
Both parents should be able to take up to six months' leave, Reform says, but would still receive £5,000 irrespective of how much leave they take.
Current arrangements for leave allow mothers to claim statutory maternity pay after continuous employment with their company of 26 weeks.
A mother receives 90% of her average weekly salary for the first six weeks with no upper limit.
The rate then falls to £123.06 per week if this is lower than 90% of average earnings, payable for up to a maximum of 33 weeks, though mothers can take a year off in total.
Fathers are entitled to two weeks' paid leave after the birth.
A spokesman for the Department for Business, Innovation and Skills said: "It is important that both mothers and fathers are able to spend the time they need with their families, whilst also being able to balance their work commitments.
"That is why we have introduced a generous and progressive package of measures to help working parents achieve a balance whilst recognising the needs of their employers."