When an employee becomes pregnant, they are entitled to statutory maternity pay provided they meet certain requirements.
One such requirement is a minimum earnings level which is calculated by looking at the employee’s earnings during a distinct period of time – the 8 weeks preceding the qualifying week. The qualifying week is the 15th Achieving the minimum level of earnings means that the employee should receive SMP which is paid at 90% of her normal rate for 6 weeks, followed by a maximum 33 weeks at the standard rate (currently £138.76 per week).
Alabaster vs Barclays Bank Plc
Ms Alabaster commenced maternity leave in January 1996. She was given a pay increase in December 1995, but this was not included in her maternity pay calculation as this fell outside of the qualifying period for calculating SMP.
Ms Alabaster successfully argued that even though her employer paid her in accordance with the terms of calculation of SMP, this was a breach of the Equal Pay Act and European law.
In 2004, the European Court of Justice found that the SMP regulations failed to properly implement EU law, and as a result in 2005 the SMP regulations were amended to become compliant.
What this means for you as an employer
If a pay rise is processed at any time from the start of the qualifying period for calculation until the end of the period of maternity leave, the employer is obliged to recalculate the SMP due, using the new increased rate. This may affect both the 90% rate and the entitlement to the standard rate.
Current employees are entitled to make backdated claims for SMP increases for up to 6 years.
You are expected to keep SMP records for up to 3 years, so employees must be able to support any claims greater than 3 years old with sufficient evidence to show that their SMP should be recalculated (payslips, notifications of salary increases etc) week before the week in which the baby is due.
As always contact Peninsula should you require any assistance or clarification, call 0844 892 2772.