Businesses of all shapes and sizes are required to make mandatory payments to their employees to cover various statutory payments that they are entitled to. These include Statutory Maternity Pay, Statutory Paternity Pay, and Statutory Shared Maternity/Parental Pay and Statutory Adoption Pay.
The current levels of these statutory payments are as follows:
Statutory Maternity Pay/Adoption Pay
. the first 6 weeks payable at 90% of average weekly earnings before tax.
. the remaining 33 weeks payable at £148.68 or 90% of any lower actual weekly earnings.
Statutory Paternity Pay
. currently £148.68 or 90% of any lower actual weekly earnings for one or two consecutive weeks’ leave.
Many businesses believe that having to make these statutory payments are a drain on their finances and profits. It is often a reason cited why businesses are reluctant for example to hire either pregnant women or young women who may wish to start a family shortly after starting their employment. These employment rights are viewed negatively by many businesses as opposed to being embraced and promoted.
However medium and large businesses can actually claim back 92% of the value of these statutory payments that they have paid out. Reimbursement is achieved by deducting the gross amounts of these payments paid from the total amount of national insurance contributions due for the relevant tax month. The additional costs over and above this level however remain a cost to the business.
Small businesses and Micro- businesses may also qualify for Small Employer’s Relief where up to 103% of these statutory payments can be reimbursed. Up to 100% of the value of these reimbursements are made as ‘Recovery’ and a further 3% of the value as ‘Compensation’ To qualify these businesses need to have paid less than £45,000 in Class 1 National Insurance Contributions in the last tax year.
If a business is unable to afford to make these statutory payments, then they can even apply to HMRC for an advance payment. It is advisable to apply up to four weeks before the first payment is required.
These advance payments are however repayable by the business which needs to send an Employment Payment Summary for each pay period that statutory payments are reclaimed, even where an advance payment is made by HMRC.
Unfortunately, a similar scheme ( a percentage threshold scheme) for claiming back statutory sick pay in certain circumstances was abolished on 6 April 2014.
Remember that as an Employer you are responsible for ensuring that your qualifying employees receive their entitlements to these statutory payments. Otherwise there is a real risk of legal exposure which could result in claims being made by disgruntled employees to the employment tribunal seeking compensation for unlawful deduction of wages and potential unlawful sex discrimination.
It is also worth checking current and historical terms and conditions of employment especially for employees who may have been inherited through a TUPE transfer to see if there are any greater contractual entitlements to these and similar payments.
It is therefore highly recommended that businesses seek timely legal advice if they are unsure about their employees’ employment rights to these statutory payments.
It is also advisable to invest in a decent payroll software package to ensure that these statutory payments are reclaimed accurately and that the issue correct Employer Payment Summary details are filed with HMRC.
For further information contact Steven Eckett, Partner and Head of Employment on 0207 703 5034 or by e-mail email@example.com
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