Employee earnings affected by a pay rise
A pay rise must not be withheld because of maternity leave.
You must recalculate the average weekly earnings (AWE) to take account of pay rises awarded, or that would have been awarded had your employee not been on maternity leave.
This applies if the pay rise was effective from anytime between the start of the 8 week relevant period for Statutory Maternity Pay (SMP) and the end of the statutory maternity leave.
If a pay rise is awarded after you’ve calculated your employee’s earnings, and that pay rise is effective from the start date of the relevant period but before the Maternity Pay Period (MPP) ends, you must:
- recalculate the AWE to include the pay rise as though it was effective from the beginning of the relevant period
- pay any extra SMP due
If a pay rise is awarded which, when recalculated, means that earnings are now high enough for your employee to get SMP when they could not before, you must:
- Work out 90% of the AWE.
- Take away the standard rate of SMP.
- Pay the difference for 6 weeks.
If 90% of the AWE is less than the standard rate you might not have to pay your employee anything.
This is because they may have received the balance of SMP due from Jobcentre Plus (or the Jobs and Benefits office in Northern Ireland) as Maternity Allowance (MA).
Not all women are entitled to MA, or the MA may be less than the SMP your employee is now entitled to. You should ask them to get a letter from the Jobcentre Plus (or the Jobs and Benefits office in Northern Ireland) to confirm how much MA was received.
If your employee gives you a letter from the Jobcentre Plus office (or the Jobs and Benefits office in Northern Ireland) showing how much MA was received:
- Work out the total amount of SMP they’re entitled to.
- Take away the MA that was paid.
- Take away any SMP you’ve already paid.
- Pay your employee the difference.
Your employee should still benefit from a pay rise, even if they do not intend to return to work with you after their maternity leave has ended.
If a pay award is made after they have terminated their employment and the pay rise is backdated to when they were working for you, or were on maternity leave with you, they may be entitled to benefit from the pay rise. You must check the terms of their old contract of employment.
If more than one pay rise has been awarded during the period they were on maternity leave you’ll need to make separate calculations for each one.
Further details can be found here