We have an employee who is due to give birth in a few weeks. The employee was supposed to commence maternity leave at that time, but has now provided us with notice of resignation and will leave us before her maternity leave starts. Do we have to pay her any maternity pay and, if so, can we do this as a lump sum?
While there are several rules regarding eligibility to statutory maternity pay (SMP), such as length of service, the main rule relevant to your question is that an employee will be entitled to SMP if they were still employed by the organisation in the 15 weeks before the week in which they are due to give birth.
Once that threshold is reached, the employee will remain entitled to SMP even if they are dismissed or resign from their role. There have been previous cases whereby an employee has left under a settlement agreement and the employer has attempted to remove liability for SMP under the agreement. However, it is not possible to contract out of the right to SMP and an employee not paid SMP in those circumstances would have a claim regardless of the terms of the agreement.
If you pay enhanced maternity pay, i.e. more than the statutory rate, it is likely that the employee would lose entitlement to the additional pay, but be careful to check the wording of any contractual terms and conditions on that point.
In relation to the second part of your question, it is possible to pay the SMP entitlement in a lump sum. However, there are reasons why it may be better to pay SMP in your regular payroll. For example, SMP entitlement will stop if the employee commences work for a new employer. If you have already paid 39 weeks’ worth of SMP but the employee begins working for a new employer after 12 weeks, you will have paid 27 weeks’ SMP in error. It may then be difficult to recoup that payment from HMRC.
In addition, depending on the timing of the maternity leave, it may be the case that the statutory rate of SMP increases after a lump sum has been paid. In those circumstances the employee may have been underpaid SMP, which could expose your organisation to a claim.
For those reasons, you may wish to consider whether it makes more sense to continue to pay the employee in instalments.
If you have any questions on any of the issues raised in the above article, please contact Seanpaul McCahill.