A topic that has featured in the news recently is pension payments for parents on maternity or paternity leave, specifically where employers have failed to pay the correct level of pension contributions during that period.
At Lambert Chapman, this is something we manage on a monthly basis and it’s vital that contributions are calculated correctly.
As many will know, Statutory Maternity Pay (SMP), unless enhanced by your employer, is paid as follows:
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90% of your average weekly earnings (before tax) for the first 6 weeks.
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£187.18 or 90% of your average weekly earnings (whichever is lower) for the next 33 weeks.
Statutory Paternity Pay is currently £187.18 per week or 90% of your average weekly earnings. Again, whichever is lower.
While on parental leave, your employer should continue to pay the same level of pension contributions as if you were working full-time, even though your actual pay during this time is likely to be much lower. It’s important to note that this also applies to those on adoption leave.
This rule applies only during the paid period of parental leave, typically the 39 weeks covered by Statutory Maternity Pay.
Employees, however, are only required to pay pension contributions based on what they are actually paid each month while on leave.
Payroll errors can happen, especially when it comes to less widely publicised rules like these. If you, as either the employer or employee, notice a mistake, it’s important to establish how far back the error goes and correct it in the next available pay run.
If you’re unsure whether your business is meeting its pension obligations during parental leave, our payroll team is here to help. Get in touch with us at Lambert Chapman to ensure your processes are compliant and your employees are getting what they’re entitled to.
Disclaimer
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.