SMP is paid at 90% of the average earnings for the first 6
weeks for most women, followed by 20 weeks at the standard rate for
that year.
If a claim is made for additional payment,
due to a pay rise, in the majority of cases this rise will only
affect the first 6 weeks' payment - there is no impact on the
standard rate paid whatsoever. To illustrate the point have a
look at the following example:
Example for 05/06 Tax
Year
A monthly paid employee is paid £15,600 per
annum, so her monthly salary is £1,300. In the 2 months in
the set period used to calculate average earnings there were no
additional payments made so the SMP calculation was based on the
following:
(1300 + 1300 x 6) divided by 52 = £300
average weekly earnings (AWE).
So this employee received 6 weeks SMP at
£270 and 20 weeks at £106. The employee decided to take
additional maternity leave for the full year. One month
before she returned to work she was awarded a 5% pay rise effective
from the month after she started Maternity leave. Even though
this rise does not actually affect the average earnings, the SMP
paid must be re-calculated as though her salary had been 5%
more:
£15,600 + 5% = £16,380. This means her
monthly salary would have been £1,365, which in turn changes her
AWE to £315. The quick way of dong this is simply adding 5%
to the original £300 AWE..
So the additional SMP due is 6 x £15 =
£90.
It is important to remember, however, that for some low earners
the 90% will be paid for the full 26 weeks, therefore every payment
will be due an increase if the claim is valid.
In addition, there may also be a larger
impact than making an additional payment. For some women it
may mean entitlement to SMP for the first time. In this
instance an employer would assume, unless told otherwise, that the
employee had been receiving Maternity Allowance (MA) from Jobcentre
plus instead. The employer would then be responsible for
paying the difference between the SMP that should have been due and
the MA that was actually paid.
In addition, there may also be a larger impact than making an
additional payment. For some women it may mean entitlement to
SMP for the first time. In this instance an employer would
assume, unless told otherwise, that the employee had been receiving
Maternity Allowance (MA) from Jobcentre plus instead. The
employer would then be responsible for paying the difference
between the SMP that should have been due and the MA that was
actually paid.
*Note – prior to
April 2003 the rules governing SMP were slightly different.
Only 18 weeks SMP was paid and the total possible Maternity Pay
period was 40, rather than the 52 weeks currently. There was
also a different method of calculating the higher & lower rate
weeks. If you have a claim dating back to this period it is
advisable to familiarise yourself with the legislation in place at
this time.
