How does maternity pay work?

MrChips

My wife has been on maternity leave since 10 January and has been paid twice since then (i.e. January and February pay). Her employer (FTSE100 company) operates a salary sacrifice system and this means that instead of a basic salary of £32,000, her contractual pay for 2011 is £15,600 per annum as she makes large pension contributions and also receives medical insurance, dental insurance, gym membership and childcare vouchers.

The maternity pay is statutory minimum for weeks 1-6 (i.e. 90% of gross earnings) and for weeks 13-39 (i.e. £128 per week) but she receives 100% of basic salary for weeks 7-12 which is above statutory minimum.

I estimated what she would receive for January and February and her actual pay was a lot less so I am wondering if I have misunderstood of whether she has been underpaid!

For January I was expecting 1 week of basic pay (at the post sacrifice level) to cover the week before maternity leave commenced and three weeks of "90% of gross". What she received was three weeks of 90% of gross + 1 week of basic pay at the pre sacrifice level minus one month of sacrificed salary. I.e. the salary sacrifice deductions were also applied to her statutory maternity pay. Can that be right?

The same happened in February. She received the remaining three weeks of her "90% of gross" and the first week of her 100% of basic (for week 7 of her maternity leave). Again a full month of salary sacrifice deductions were made when I would expect it to apply to the week 7 payment only.

Can anyone clarify the correct treatment of salary sacrifice deductions during maternity leave? My understanding is that she has agreed to a change to her contractual pay and as such the employer is responsible for providing the extra benefits, and my wife's salary has reduced accordingly. Therefore when she is due to receive statutory maternity pay, no deductions should be made to this as it is a legal minimum?

Thanks!

ifonlyitwaseasier

they can continue the sacrifices unless your wife gave notice, afaik they also have to do it whilst she is on stat but they can't take it from her, they have to pay it themselves.

MrChips

Sorry, which notice do you mean? She gave sufficient notice of her intention to start maternity leave.

ifonlyitwaseasier

i mean did she give notice to stop the sacrifices from her salary?


look here

MrChips

She doesn't want to stop the sacrifices - she wants to retain the various benefits e.g. higher pension contributions, childcare vouchers and various insurances - so she didn't give notice to change her salary.

Thanks for the link - I have read that before and that is where I got my understanding of the situation from.

The way I see it, to take a simplified example, if her salary is £24,000 and she agrees to sacrifice 50% for pension contributions, such that her new contractual entitlement is cash of £12,000 and employer pension contributions of £12,000, then during maternity leave the employer should pay statutory maternity pay in lieu of the cash, and continue providing the employer pension contributions of £12,000 per annum (or £1,000 per month).

Her employer is paying the contributions but effectively taking these out of her maternity pay and thus paying less than the weekly statutory minimum in some weeks.

Emily1975

Your logic sounds about right to me. Original salary £24k, new salary £12k plus higher employer pension contributions.

Maternity pay for weeks 1-6 should be 90% of gross weekly earnings + usual non cash benefits, incl usual employer pension contributions
Maternity pay for weeks 7-39 should be £124 per week + usual non cash benefits, incl employer pension contributions

Ruth.77

Due to the way statutory Maternity Pay is calculated yours wifes company are paying her correctly. The 90% SMP is calculated on her actual NIable pay from a few months prior to her going on Maternity Leave, therefore it would be 90% of her post salary sacrifice pay not 90% of her pre salary sacrifice pay.

Unless they pay Occupational Maternity pay, they seem to calculated as per HMRC instructions

They are not allowed to make any salary sacrifice deductions from her SMP.

I have worked in payroll for 12 years so hopefully that helps but otherwise PM me and I will explain it further.

Ruth

MrChips

Thanks Ruth - that does help, but I will PM you to clarify a couple of details if may?