SMP Calculation

Jonds

Hi

My wife is going on maternity leave and works for a large Temp agency. As part of her pay, she receives a tax benefit in the form of a Travel and Subsistence Allowance (TSA). This essentially saves each employee from having to go to HMRC to claim a tax allowance on travel expenses. The agreement is that they can have a tax benefit on £25 per week (ie £5 for arguments sake).

To process this in their payroll they add £25 tax/ni free and then deduct £25 with tax/ni. The net effective is the tax saving of £5. This is simply the mechanism they use in their payroll system to get this tax benefit through.

However, when calculating maternity pay it should be based on NI-able income. This is to avoid the average earnings calculation including non taxable expenses or salary sacrifice arrangements. The problem is that the agencies payroll system deducts the £25 TSA which is down as being subject to tax/ni. This is fundamentally wrong in my opinion. The TSA is set up in their system that way to achieve the desired tax effect.

So when my wife's maternity pay has been calculated, their system has deducted £25 every week. In addition , my wife does not even pay tax so it is of no benefit to her anyway. Each week her pay shows:

20 hours x £7.75 = £155
TSA = £25
TSA = -£25

Total = £155.

When calculating SMP, their system has taken the £155 and the -£25 to get £130, which is what they say her average pay is and therefore SMP will be calculated on this.

This is just plain wrong. I can see why their payroll system would do this because they have set it up this way as a mechanism to get the tax benefit through (which my wife doesn't get anyway!) without consideration for the effect it has on SMP calculations.

The problem is that their payroll clerks have no clue and just do what the computer tells them.

I wonder how many women have been underpaid their SMP by this agency....