When it comes to Statutory Parental Pay and workplace pensions, the rules can be confusing and I have received several enquiries asking for clarification.
There are two important points to bear in mind:
- Any Statutory Maternity, Paternity or Adoption pay must be included in the calculation of pensionable earnings, regardless of the employer’s definition of pensionable earnings.
- All references to Statutory Maternity, Paternity or Adoption pay are defined in terms of weeks.
Hence, under current UK legislation, Statutory Maternity Leave is 52 consecutive weeks and is divided into two parts: paid or ordinary parental leave and unpaid leave. These periods are 26/26 weeks or 39/13 weeks respectively, depending on eligibility.
As far as workplace pensions are concerned, these two periods are treated separately.
For the paid or ordinary parental leave period, the employer must continue contributions based on the employee’s normal pre-leave salary, whereas the employee contributions are based on actual pay (there is no requirement for the employer to pay any shortfall).
Where the workplace pension is on a matched contribution basis, the employer contribution is based on the level the employee would normally contribute before taking leave.
For the remaining unpaid period, as the employee has no earnings, there is no obligation on either employer or employee to make contributions.
When the employee returns to work and starts earning again, they are re-assessed accordingly.
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If you would like further advice on this, or any other workplace pensions issues, give me a call today on 01483 205890.