We are bringing you some insights into commonly asked questions in payroll as part of our Payroll Peeks 👀 series

Statutory Pay and Pensions

How statutory pay affects pension contributions

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.

Pension calculations -
for employees in a non-salary sacrifice pension scheme

Statutory Sick Pay

Employee contributions: Statutory sick pay is included in the pension calculation.
Employer contributions: Statutory sick pay is included in the pension calculation.

Statutory Maternity/Paternity Leave

Employee contributions: Statutory maternity (SMP)/paternity pay (SPP) are included in the pension calculation. Any KIT days are also included as pensionable earnings.
Employer contributions: SMP/SPP are included as pensionable but, as a minimum, contribution amounts are based on the employees’ full pay as if they were still working. If the employee’s hours were varied, you should take the average earnings over the past 12 months or an appropriate period. Contributions should remain at the same level throughout the maternity leave period.

Pension calculations -
for employees in a salary sacrifice pension scheme

Key point💡Any statutory pay cannot be reduced by any salary sacrifice deduction

Statutory Sick Pay

Employee contributions: Statutory sick pay is not included in the pension calculation.
Employer contributions: Statutory sick pay is included in the pension calculation.

Statutory Maternity & Paternity Leave

Employee contributions: SMP/SPP pay are not included in the pension calculation. Any KIT days are included as pensionable earnings.
Employer contributions: SMP/SPP are included as pensionable but, the employers’ contribution must also include the employees regular pension contribution. Thus it becomes the employers responsibility to pay both contributions. As a minimum, the employers' contribution amount is based on the employee’s full pay as if they were still working. If the employee’s hours were varied, you should take the average earnings over the past 12 months or an appropriate period. Contributions should remain at the same level throughout the maternity leave period.

Payslip Examples

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:

Statutory Maternity Pay: £853
Employee’s pension contribution: zero
Employer’s pension contribution: £200 (minimum of £200 based on pre-SMP salary)

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

Statutory Maternity Pay: £853
Enhanced maternity pay: £397
Employee’s pension contribution: £19.85 (£367 x 5%)
Employer’s pension contribution: £180.15 (minimum of £200 less employee contribution)

How long must employers maintain pre-leave pension contributions

This guidance relates to employees who are currently in a salary sacrifice pension scheme.

For paternity leave, the employer should ensure full contributions are paid for the duration of paternity leave.

For maternity leave, some employers only keep their pre-leave pension contributions in place for the first 26 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.

Statutory Maternity Leave & Pay

Who is entitled to Maternity Leave?

All employees who have a legal status of employment are entitled to maternity leave. This does not mean they are automatically entitled to maternity pay! Someone who does not have the legal status of "employee" can still stop working to care for their child.

Compulsory Maternity Leave

A worker must not work for a minimum of 2 weeks (4 weeks if they do factory work) from the date the baby is born. This is the case even if your employee says they want to!

Understanding the dates:

From first day of maternity leave	Terminology	Common abbreviation
First 26 weeks	Ordinary maternity leave	OML
Next 26 weeks	Additional maternity leave	AML

Who is entitled to Statutory Maternity Pay?

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

The employee is considered to be an employee*
The employee has been employed by the same employer for at least 26 weeks by the end of the 15th week before the expected week of childbirth (roughly week 26 of pregnancy)
The employee earns a gross amount of at least £129 per week on average in the 8 weeks (if paid weekly) or 2 months (if paid monthly) up to the last pay day before the end of the 15th week before the baby is due.

*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.

What is Maternity Allowance?

Maternity Allowance is a payment when someone takes time off to have a baby.

If your employee is not entitled to Maternity Pay, you should issue them with a SMP1 form which the employee can use to claim Maternity Allowance.

Maternity Allowance is available if they are:

are employed but cannot get Statutory Maternity Pay (SMP)
are self-employed
have recently stopped working
take part in unpaid work for the business of your spouse or civil partner

Maternity Allowance can be paid for up to 39 weeks. Check out HMRCs site for further eligibility criteria.

Maternity Allowance can be applied for as soon as they've been pregnant for 26 weeks. Payments can start any time between the 11th week before the baby is due and the day after the baby is born.

What does an employer need from their employee for 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:

Statutory Maternity Pay (SMP) from her employer
Maternity Allowance (MA) from Jobcentre Plus
Sure Start Maternity Grant (SSMG) from Jobcentre Plus

The certificate:

verifies the pregnancy
confirms the date of the expected week of confinement (EWC)
confirms the actual date of birth when completed after confinement

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.

When should maternity leave start?

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

Leave will also start:

the day after the birth if the baby is early
automatically if they’re off work for a pregnancy-related illness in the 4 weeks before the week (Sunday to Saturday) that your baby is due

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:

Ordinary Maternity Leave - first 26 weeks
Additional Maternity Leave - last 26 weeks

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).

How much is Statutory Maternity Pay and who pays for this?

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 for 39 weeks (the remaining 13 weeks of maternity leave are unpaid).

SMP is paid at two rates:
1. For the first six weeks you pay 90% of the employees average pay*.
2. After that, they get a flat rate of £194.32 per week (April 2026 – April 2027) for 33 weeks, or 90% of their average earnings* if they earn less than £194.32 a week.

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.

*The average salary is calculated from the pay they actually received before tax in the eight weeks (or two months) up to the last pay day before the end of the qualifying week. This pay might include other payments such as a one-off bonus or commission, but these payments must still be included in the 90% pay calculation. If your employee had any salary sacrifice deductions during this period, it is the reduced salary that is used for the average pay calculation.

**Small Employers Relief is applicable if your total NIC bill was £45,000 or less in the previous tax year, ignoring any Employment Allowance deductions.

What happens to holiday accrual during maternity leave?

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:

taking some annual leave before maternity leave and some after returning to work
using all of their holiday for the year before they start maternity leave
ending maternity leave earlier and taking annual leave instead
taking most of their holiday after maternity leave, and carry some into the next holiday year

Does a pay increase while on maternity leave have any impact?

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 only affect the statutory amount which was paid in 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:

If you have paid enhanced maternity pay during the first 6 weeks of maternity leave, your employee’s pay will not be affected. The resulting change is the SMP will increase and your enhanced pay will decrease.

If you have not paid any enhanced statutory pay during the first 6 weeks of maternity leave, your employee will be entitled to additional pay.

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.

What happens if an employee leaves during their maternity leave?

Employees must hand in their notice in the same way as normal. You will need to pay your employee their full 39 weeks of statutory pay if:

The employee meets all of the entitlement criteria previously mentioned
The leave date is after the 15th week before the baby’s due date.

Their leave date will remain the actual date they leave the company, not their end of maternity leave date.

Statutory Paternity Leave & Pay

Who is entitled to Paternity Leave?

When an employee takes time off because their partner's having a baby, adopting a child, or having a baby through a surrogacy agreement, this is known as Paternity Leave.

Employees are entitled to paternity leave if the are:

An employee
Give the correct notice

Your employee should inform you of the baby’s due date at least 15 weeks before the baby is due but must give 28 days’ notice if they want to change the date the Paternity Leave starts. Employee's don't have to give a precise date for leave. Instead, they can give a general time, such as the day of the birth or one week after.

Leave cannot start before the birth and must end within 52 weeks of the baby’s birth (or the due date if the baby is early). The start and end date rules are different if its adoption.

A week of Paternity Leave is the same number of days that normally worked in a week. For example, if you they only work on Mondays and Tuesdays, then a week of leave is 2 days.

Employees may take up to 2 weeks' leave. These can either be taken together or in separate one-week blocks. They get the same amount of leave even if they have more than one child (e.g. twins).

An employee might be eligible for:

2 weeks’ Paternity Leave
Paternity Pay
Shared Parental Leave and Pay
Unpaid Parental Leave

Being eligible for paternity leave does not automatically mean eligibility for paternity pay.

Who is entitled to Paternity Pay?

To be entitled to paternity pay, your employee must:

be employed by the same employer up to the date of birth
earn an average of at least £129 a week (before tax)
give the correct notice
have been continuously employed by the same employer for at least 26 weeks up to the end of any day in the ‘qualifying week’

The ‘qualifying week’ is the 15th week before the baby is due. This is different if they adopt.

If your employee isn't entitled to Paternity Pay, you need to issue them with a SPP1 form which they can use to apply for Universal Credit where applicable.

Do I have to let employees attend antenatal appointments

Employees can take unpaid leave to accompany a pregnant woman to 2 antenatal appointments if they’re:

the baby’s father
the expectant mother’s spouse or civil partner
in a long-term relationship with the expectant mother
the intended parent (if you’re having a baby through a surrogacy arrangement)

They can take up to 6 and a half hours per appointment. The employer can choose to give them longer.

Permanent employees can apply for leave immediately. For agency workers, they'll need to have been doing a job for 12 weeks before they qualify.

What happens if they lose the baby?

Employees can still get Paternity Pay and Leave if the baby is:

stillborn from 24 weeks of pregnancy
born alive at any point during the pregnancy

Employees can take any leave booked before losing the baby. If any paternity leave is still due, they can still book and take this but this must be booked within 8 weeks of the death.

In these circumstances, employees may also be eligible for Statutory Parental Bereavement Pay and Leave. Check HMRCs site for further details.

When should paternity leave start?

Leave cannot start before the birth and it must end within 52 weeks of the baby’s birth (or the due date if the baby is early). The start and end date rules are different if they adopt.

How much is Statutory Paternity Pay and who pays for this?

The statutory weekly rate of Paternity Pay is £194.32, or 90% of the average weekly earnings (whichever is lower).

Any money is paid in the same way as normal wages, for example monthly or weekly. Tax and National Insurance will be deducted.

Employers cannot pay less than the statutory amount but may offer enhanced pay.

Even if you pay an employee more than the statutory amount, you can usually only reclaim 92% of that amount. You may be able to reclaim 109% if you qualify for Small Employers’ Relief.

Shared Parental Leave

What is Shared Parental Leave?

Shared Parental Leave is available if an employee and their partner are:

having a baby
using a surrogate to have a baby
adopting a child
fostering a child who you’re planning to adopt

They can share up to 50 weeks of leave and up to 37 weeks of pay between them.

Pay and leave must be shared in the first year after the child is born or placed with your family.

SPL can be used in blocks separated by periods of work, or taken it all in one go. Both parties can choose to be off work together or stagger the leave and pay.

Who can get Shared Parental Leave?

To qualify for SPL, your employee must share responsibility for the child with one of the following:

their husband, wife, civil partner or joint adopter
the child’s other parent
their partner (if they live with them)

Your employee or their partner must be eligible for maternity pay or leave, adoption pay or leave, or Maternity Allowance.

They must also:

still be employed by you while they take SPL
give you the correct notice including a declaration that their partner meets the employment and income requirements which allow your employee to get SPL
have been continuously employed by you for at least 26 weeks up to any day of the ‘qualifying week’, or the week they are matched with a child for adoption in the UK

The ‘qualifying week’ is the 15th week before the baby is due.

You can refuse SPL if the employee does not qualify. You do not have to give a reason for refusing SPL.

Who can get Shared Parental Pay?

They can get ShPP if they’re an employee and one of the following applies:

they’re eligible for Statutory Maternity Pay (SMP) or Statutory Adoption Pay (SAP)
they’re eligible for Statutory Paternity Pay (SPP) and their partner is eligible for SMP, Maternity Allowance (MA) or SAP

They can also get ShPP if they’re a worker and they’re eligible for SMP or SPP.

You can refuse SPL or ShPP if the employee does not qualify. You must tell the employee the reason if you refuse ShPP.

Eligibility for both parents

To be eligible for Shared Parental Leave (SPL) and Statutory Shared Parental Pay (ShPP), both parents must:

share responsibility for the child at birth
meet work and pay criteria - these are different depending on which parent wants to use the shared parental leave and pay

They’re not eligible if they started sharing responsibility for the child after it was born.

Both parents must meet the same eligibility criteria to get SPL and ShPP

Both parents must:

have been employed continuously by the same employer for at least 26 weeks by the end of the 15th week before the due date
stay with the same employer until at least the week before you start your SPL
be ‘employees’, not ‘workers’* for eligibility for SPL
each earn on average at least £129 a week for eligibility for ShPP

*If either of them is a ‘worker’, they might be able to share ShPP but not SPL.

How to start Shared Parental Leave

For Shared Parental Leave (SPL) to start, the mother or adopter must do one of the following:

end their maternity or adoption leave by returning to work
give you ‘binding notice’ (a decision that cannot normally be changed) of the date when they’ll end their maternity or adoption leave
end maternity pay or Maternity Allowance (if they’re not entitled to maternity leave, for example they’re an agency worker or self-employed)

A mother must take a minimum of 2 weeks’ maternity leave following the birth (4 if she works in a factory).

The adoptive parent getting Statutory Adoption Pay must take at least 2 weeks’ adoption leave. They can take it from the day of the placement, or up to 14 days before the placement starts.

The mother must give you notice (at least 8 weeks) to end her maternity pay, or tell Jobcentre Plus to end her Maternity Allowance. Adopters must give you notice to end adoption pay.

SPL can start for the partner while the mother or adopter is still on maternity or adoption leave if she’s given binding notice to end her leave (or pay if she’s not entitled to leave).

Example

A mother and her partner are both eligible for SPL.

The mother goes on maternity leave 10 weeks before her baby is born. She decides that she’ll take 16 weeks of maternity leave and gives you notice.

Since the mother has given binding notice, her partner can start SPL as soon as the baby has been born (as long as they’ve given at least 8 weeks’ notice).

What action is needed from the employer?

The employee must give you written notice if they want to start SPL or Statutory Shared Parental Pay (ShPP). ACAS have some forms available here for them if helpful

After receiving this notice, you can ask for:

a copy of the child’s birth certificate
the name and address of their partner’s employer

You have 14 days to ask for this information. Your employee then has a further 14 days to provide it.

What is the rate of Shared Parental Pay and who pays for this?

ShPP is paid at the rate of £194.32 a week or 90% of an employee’s average weekly earnings, whichever is lower.