Recent data shows that nearly two thirds (63.%) of UK businesses are enhancing their maternity pay by paying employees more than the statutory minimum. ‘Enhanced’ or ‘contractual’ maternity pay is a benefit that can not only help you retain valuable employees for longer, but it can also be an appealing benefit to candidates in the recruitment process.
The most common option for employers is to offer full pay for the first six weeks or more when the employee takes maternity leave, instead of 90% of their average weekly earnings before tax.
Alternatively, 45.9% of businesses offered financial benefits to those returning from maternity leave.
If an employee does not qualify for SMP they may qualify for Statutory Maternity Allowance (SMA). This is a payment from the government rather than the employer. To arrange this, you’ll need to provide your employee with an SMP1 form as soon as possible:
• within 7 days of its decision
• within 28 days of the employee’s request for SMP, or the birth, whichever is earlier.
You can get this from the government website and fill in some information including the reason you’re not able to pay them. Please note, if there’s a mistake on this form it can be quite costly – so make sure you double check it.
An employee may have the right to contractual maternity pay even though they do not qualify for SMP. If that’s the case an employee may be able to claim SMA as well.
As we know, SMP is based on the employee’s average earnings during the eight week reference period ending in the “qualifying week” or the 15th week before EWC.
The Alabaster Ruling dictates that if there’s a pay rise given after you’ve calculated their statutory maternity pay, but before the end of the employee’s SML finishes, you need to recalculate it to include the new salary, as if the pay rise had taken effect at the start of their reference period.
The pay rise is backdated for SMP purposes and as such the whole SMP entitlement will need to be recalculated and a top-up payment made.
Contractual bonuses
An employee on maternity leave remains entitled to their contractual benefits whilst on leave, apart from those relating to wages or salary.
This includes the right to a contractual bonus for:
• The time before maternity leave
• The two weeks of compulsory maternity leave
• The period after maternity leave
For the rest of the maternity leave, other than those two compulsory weeks, you do not have to pay the employee a contractual bonus.
Discretionary bonuses
If a discretionary bonus is based on work output or personal targets, then you may not have to pay it.
However, if it’s a more general bonus, for example a company-wide bonus scheme based on the company profits, or based on a department’s performance, then you will have to pay it. In short, if a bonus payment is made to other employees, it should also be paid to an employee on maternity leave.
Any bonus payment must be made at the time it would normally have been, irrelative to when SMP is paid.
