Calculating statutory maternity pay (SMP): five tips for employers

Peter MacDiarmid/REX/Shutterstock
Peter MacDiarmid/REX/Shutterstock

Statutory maternity pay (SMP) can be tricky to calculate, for example where an employee’s pay increases during her maternity leave. We set out five top tips for employers struggling with SMP calculations.

1. Consider if employee is eligible for SMP

Before spending time on the maths, the employer will need to assess first whether or not the employee is eligible for SMP.

The employer will need to know when the baby is due, the employee’s length of continuous service and the employee’s average weekly earnings.

 

2. Recalculate SMP if employee receives a pay rise

If the employee receives a pay rise at any point during her maternity leave, this will require a recalculation of her SMP and the employer must backdate the increase in SMP to the start of the employee’s maternity leave.

A pay rise may also mean that an employee who was not eligible for SMP before may now be eligible on account of the increase to her weekly earnings.

 

3. Take into account allowances

When calculating an employee’s average weekly earnings, the employer must take into account all earnings including allowances, such as car allowances or travel allowances.

 

4. Consider the effect of salary-sacrifice schemes

Where the employer operates a childcare voucher scheme based on salary sacrifice, this could affect the calculation of the employee’s SMP, causing the employee to receive less SMP or no SMP at all.

The Employment Appeal Tribunal has recently held in Peninsula Business Services Ltd v Donaldson that there is no requirement to offer childcare vouchers given through a salary-sacrifice scheme during an employee’s maternity leave.

 

5. Retain records and recover SMP

Employers are required to keep records containing prescribed information relating to each employee’s SMP for three years after the end of the tax year in which the maternity pay period ends.

The majority of employers can reclaim a large proportion of the SMP that they have paid out from the Government. Records relating to SMP that the employer retains will be used to support such claims.

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  1. Calculating statutory maternity pay (SMP): five tips for employers - 5 Jul 2016

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