PART 4: STATUTORY PAYMENTS
relevant period. The Alabaster case led to a change of regulations from 6th April 2005 as follows.
Where the effective date of a pay rise: • falls within the period starting with the beginning of the relevant period and ending with the end of either Ordinary or Additional Maternity leave, or • before the start of the relevant period, but the earnings calculated at the time SMP was calculated, but had not been adjusted, the Average Weekly Earnings (AWE) must be recalculated to include the pay rise as though it was effective from the beginning of the set period and any additional SMP that results must be paid (although of course any payment of OMP can go towards discharging this liability). This could be for a maximum 17-month period and routines must be in place to capture this information. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS Where a pay rise is awarded which, on recalculation, results in increased earnings that create an entitlement to SMP where none existed previously: • work out 90% of the Average Weekly Earnings • deduct the standard rate of SMP and pay any difference for six weeks. If however 90% of AWE is less than standard rate no payment falls due (as the employee will have received sufficient MA), except where no entitlement to Maternity Allowance (MA) existed, in which case the employee needs to produce a letter to this effect from Jobcentre Plus before the employer can pay the 39 weeks SMP that is due. Where an employee has received less than the standard rate of MA, Jobcentre Plus will provide a letter to that effect so the employer can pay the additional SMP due. The employee must benefit from a pay rise even if she does not intend to return to work after maternity leave has ended. Where a pay award is made following termination of employment, and the pay rise is backdated into the time of employment, her record should be checked to verify her entitlement. In cases where more than one pay rise has been awarded during the period, separate calculations will be necessary. In cases where pay adjustments to correct previous payments have taken place, gross earnings will be those that have taken adjustments into account. Employers are not expected to recalculate SMP retrospectively for pay rises falling before April 2005, however when an employee so requests it, a recalculation must be performed going back three years from the date of the request and up to six years if the employee has the requisite data (e.g. payslips) to facilitate a recalculation. No printing, copying or reproduction permitted. Employees, with aggregated earnings for NICs - can choose to have all earnings added together for calculation of Average Weekly Earnings for SMP. N.B. Even if additional SMP is calculated as being due, any payment of Occupational Maternity Pay (OMP) can be offset against this, so you may only have to produce a payslip and accounting change to show additional SMP offset by a reduction in OMP. The OMP scheme however will determine whether this is the case, or whether additional OMP is due to be paid as well.
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