Is it time to limit maternity pay?

baby-postIt has been an interesting week that has seen an apparent U-turn in the Chancellor’s plans to cut tax credits, but plans remain to control spending on benefits.  However, since the introduction of statutory maternity pay in its current form, billions of pounds have been paid by the tax payer in statutory maternity pay linked directly to the bonus payments of bankers.

The first six weeks of Statutory Maternity Pay (SMP) are paid at 90% of average earnings. For the purpose of SMP average earnings are calculated on earnings paid during the period 15th to 23rd week before the baby’s due date.  Any bonuses, commissions, deferred awards and payments from benefit plans are included in this calculation.  With no upper cap on the level SMP for the initial six-week period, and Company’s able to claim back 92% of this from the Government, tax payers are funding a large amount of money, equivalent to second bonus, to those lucky enough to have a “bonus baby”.

There are few benefits in the United Kingdom that are not means tested but surely, at a minimum, the introduction of an appropriate cap on SMP would be a sensible consideration?

Jim Taylor LLM

The opinion given in this article is for general information only and is intended to illustrate and highlight themes which may affect employers and their employees. It should not be taken as specific advice on any situation or the appropriate course of action for any particular company or employer. Should you wish to discuss a similar situation or any other matter please contact Ascent HR Limited. ©Ascent HR Limited.

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