Recalculation of maternity pay letter

If an employee is awarded a pay rise at any point between the start of the original statutory maternity pay (SMP) calculation period and the end of their statutory maternity leave, you must recalculate their SMP to take account of that pay rise. It may also mean an employee now qualifies for SMP when previously they didn’t.

SMP

Assuming the employee meets the eligibility conditions, SMP replaces salary during maternity leave and is paid for up to 39 weeks, six weeks at the earnings-related rate and 33 weeks at the lower standard rate. The earnings-related rate is equivalent to 90% of the employee’s average weekly earnings calculated in the “relevant period” between the last normal pay day on or before the end of qualifying week, i.e. the 15th week before the expected week of childbirth, and the last normal pay day falling not less than eight weeks earlier. The lower rate is also paid at this earnings-related rate if this works out to be less than the government’s standard weekly rate. Note that, as average weekly earnings can include commission, bonuses, etc., it means an annual bonus paid to an employee in the relevant period could significantly increase their SMP.

Effect of pay rises

If the employee is awarded a pay rise at any point between the start of the relevant period and the end of their statutory maternity leave (or would have been awarded a pay rise had they not been absent on maternity leave), the legislation provides that SMP rates need to be re-calculated to take account of that pay rise. This remains the case even if SMP has already been paid and even though the pay rise itself isn’t backdated - for these purposes, the pay rise is deemed to take effect from the start of the relevant period. What it means in practice is that, where there is a pay rise, the employee’s SMP must be increased retrospectively, or alternatively they may now qualify for SMP where they didn’t previously. You can make a lump sum top-up payment to the employee to make up any difference between SMP already paid and the amount now payable due to the pay rise, and you’d normally do this on the next usual pay day. Then, any further SMP payments must be in line with your updated calculations.

Letter options

Our Recalculation of Maternity Pay Letter addresses three scenarios: (1) recalculation of the employee’s earnings-related SMP as a result of a pay rise (this could be the first six weeks or the full 39 weeks - see above); (2) an increase in standard rate SMP - the government increases this figure annually, with effect from the first Sunday in April each year; or (3) the employee now qualifying for SMP as a result of a pay rise, having previously been ineligible due to insufficient average weekly earnings. In the final scenario, where an employee becomes eligible for SMP as a result of a pay rise, they will no longer be eligible for maternity allowance if this was being paid to them by Jobcentre Plus. They may then be required to repay it as they can’t receive both SMP and maternity allowance. Our letter therefore informs them that they’ll need to contact Jobcentre Plus where they’re now to receive SMP.