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Payroll Tip: Entitlement to benefits during maternity/adoption leave

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These questions are being answered by Learn HR, a market leader in the provision of HR and payroll training and nationally-recognised professional qualifications.


Q: What are the cash and non-cash benefits entitlements during maternity/adoption leave?

A: The first important point to make is that employees remain employees for the full period of their ordinary and additional maternity leave and, during that time, are bound by the terms of their employment contracts to the extent defined in legislation.

The following notes are written in the context of maternity leave, but they apply equally to adoption leave and, as appropriate, to paternity leave.

During ordinary maternity leave:
During the first six months of ordinary leave, a woman’s full contract of employment continues in force, with the single specific exception of her entitlement to “remuneration” under the contract.

If she qualifies, she receives SMP instead of her remuneration. Otherwise, she is entitled to all the benefits of her contract, including holiday accrual, use of a company car, private medical insurance, use of a mobile phone, participation in share schemes, reimbursement of professional subscriptions, health club membership, etc.

Whether cash payments may be paid during ordinary leave depends on whether or not the payments are “remuneration”. The legislation defines “remuneration” as “only sums payable to an employee by way of wages or salary”, i.e. payments made as reward for work performed.

As payment of wages and salaries are, under most employment contracts, payable by the employer even if no work is available, the obligation to pay the wage or salary due under the contract is not in force throughout ordinary and additional leave.

The obligation only resumes when the woman returns to work or, if she wishes to return early, after giving four week’s notice of the early return.

If a woman performs any work during the period of leave for which she is due wages or salary, it may be paid but she forfeits any SMP due for that week.

Occupational maternity pay may be paid instead of SMP; it offsets the employer’s liability to pay SMP.

Other cash payments may be made on top of SMP, such as:

  • commission relating to work performed before the start of leave, bonuses that relate to other factors, such as profit, company/department performance or loyalty, which fall due during maternity leave.
  • cash alternatives to benefits, such as a cash allowance in lieu of a company car.

During additional maternity leave:
During the following six months of additional leave, the contractual terms and conditions that apply are limited to

  • the employer’s implied obligation of trust and confidence, and to any employment terms relating to notice by the employer to terminate her employment contract, compensation in the event of redundancy, and disciplinary or grievance procedures
  • the woman’s implied obligation of good faith, and to any employment terms relating to notice by the woman to terminate her employment contract, the disclosure of confidential information, the acceptance of gifts or other benefits, and her participation in any other business.

All other terms and conditions, including the accrual of contractual holiday pay, the provision of benefits-in-kind and payments in lieu of such benefits, do not apply during additional leave unless specifically provided for in the contract. The same restrictions with regard to “remuneration” apply, although contractual maternity pay may be paid.

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Annie Hayes

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