Payroll Peeks 👀 Series 1 - Statutory Pay

Did you know that pension contributions are dealt with differently when an employee is in receipt of statutory pay? There are further considerations when using a salary sacrifice pension scheme so take a read through how to apply pension contributions correctly in these circumstances.

Pre-Statutory leave data:

> Employee’s salary before maternity leave: £30,000 (£2,500pcm)

> Employee’s normal monthly pension contribution as salary sacrifice @ 5%: £125

> Employer’s normal monthly pension contribution @ 3%: £75

> Minimum total contribution required during maternity leave: £200 (£125 + £75)

Payslip Example 1 - Monthly payslip elements during maternity leave with SMP only:

Payslip Example 2 - Monthly payslip during maternity leave where enhanced pay is applied:

Some employers only keep their pre-leave pension contributions in place for the first 39 weeks of maternity leave. However, ACAS has advised that to mitigate legal proceedings from an employee, employer contributions should continue at the same level for the full 52 weeks of leave, even though the last 13 weeks of leave may be unpaid. It is possible that even if you state time limits in your contract, these may not be upheld in court as benefits must remain at the same level for employees on maternity leave and by restricting this, it may be viewed as discriminatory.

If contacting ACAS directly regarding this, you’ll need to speak with a specialist team advisor rather than their general helpdesk.

All employees are entitled to maternity leave.

An employee will be entitled to full maternity pay if they meet all of the following conditions:

*This includes all employees who were employed during the 15th week before the expected week of childbirth to include full-time, part-time, agency workers, casual and zero hour workers, those on sick leave, annual leave, or who were on maternity leave during that time.

If your employee is not entitled to SMP, you will need to provide them with an SMP1 form so they can see if they are eligible for Maternity Allowance via Jobcentre Plus. Your employee will still be eligible for 52 weeks of unpaid maternity leave.

Your employee must provide the employer with proof of the pregnancy which can be a doctor’s letter or ideally a maternity certificate known as a MATB1. Doctors or registered midwives must issue form MAT B1 free of charge to their pregnant patients for whom they provide clinical care. This is typically provided at the 20-week scan.

The MatB1 certificate enables a pregnant woman to claim:

The certificate:

The MATB1 must be provided to the employer within 21 days of the Statutory Maternity Pay (SMP) start date, but you can agree to accept it later if you want. If you have not received proof 13 weeks after the SMP start date, you don't have to pay SMP.

You must keep records of the proof of pregnancy.

Usually, the earliest an employee can start their leave is 11 weeks before the expected week of childbirth.

Leave will also start:

Use HMRCs maternity planner to work out the earliest date maternity leave can start.

Statutory Maternity Leave is 52 weeks. It’s made up of:

Employees don't have to take 52 weeks but they must take 2 weeks’ leave after the baby is born (or 4 weeks if you work in a factory).

There is a minimum requirement for an employee to be paid if they are entitled to receive Statutory Maternity Pay (SMP). The amounts are set out by the Government at the following rates:

SMP is paid in the same way as a normal salary (for example monthly or weekly) and is subject to tax and National Insurance contributions.

All employers are entitled to claim SMP back from HM Revenue and Customs (HMRC), including the higher rate for the first 6 weeks. Your payroll provider will action this for you by way of a payroll submission to HMRC. The refunded amount will reduce your overall PAYE liability for that pay period. If this puts your PAYE account in credit, this will rollover to reduce your liability in your next payroll period. If you are eligible for Small Employers Relief**, you can recover 109% of SMP via a payroll submission. If not, you can still reclaim 92% of employees’ SMP.

Holiday entitlement should still accrue as normal during maternity leave. This includes bank holidays. You must allow your employee to carry over any holiday entitlement into the next holiday year.

You should agree with your employee how much holiday entitlement they’ll accrue during their maternity leave and discuss when they are likely to take their accrued holiday days.

Options to take annual leave could include:

Any pay rises during statutory maternity leave, even if they occur right at the end of the leave, must be back dated to the very start of the maternity leave. This will affect the first 6 weeks of statutory pay which were paid at 90% of earnings or less. Whether your employee is owed any additional pay will depend on the following:

In either case, the adjustments will need to be processed through your payroll, followed by a revised “Employer Payment Summary” submission to recover the additional amount from HMRC. You’ll also need to pay any outstanding payments made to your employee.

Employers can typically reclaim 92% of the statutory maternity/paternity pay paid to an employee, and small employers may reclaim 108.5% if eligible for Small Employers Relief (SER). To be eligible for SER, your total national insurance bill must be £45,000 or less in the last tax year (ignoring any Employment Allowance deductions). Your payroll provider will make this claim for you, reducing your total liability for the period in which it is claimed.