Are you calculating SMP correctly?

I recently posted a video in relation to a case dealing with Statutory Maternity Pay calculations and Settlement Agreements (the link to this video is available here).

The tribunal in the case involving Campus Living made an interesting point in relation to bonus payments. In that case which involved a settlement of potential claims for unfair dismissal and pregnancy related discrimination the employee concerned (the Head of Finance) received a bonus payment in the October for the year to June of around £44,000. The following January she gave birth to her child. Her bonus payment fell within the reference period for calculating 90% of normal weekly earnings for when paying Statutory Maternity Pay. The employer argued that the bonus was payment for the previous year so shouldn’t be included in the calculation i.e. it was not part of “normal weekly earnings”. The tax tribunal found that it was part of normal weekly earnings and that the employee should therefore have been paid at a higher rate for the first six weeks of her maternity leave than she had been. This has echoes of Alabaster case in relation to pay increases that are awarded during this reference period and also echoes the direction of travel we have seen vis-à-vis holiday pay and overtime and other benefits that should be included in holiday pay calculation such as commission.

An employer could reduce the potential liability by paying a bonus more regularly perhaps on a monthly or quarterly basis rather than just doing it once a year.

It’s worth nothing that there’s a £3000 penalty for getting the payment of Statutory Maternity Pay wrong.