Employment
and related matters
Statutory
Sick Pay (SSP) and Statutory Maternity Pay (SMP)
SSP
and SMP are important regulations to understand as they enforce
minimum legal requirements on employers. Each operates in
a different way.
This factsheet sets out the main principles of the regulations
and what an employer needs to consider.
Statutory
Sick Pay
SSP
applies to all employers regardless of size and represents
the minimum payments which should be paid by law.
It is possible to opt out of the scheme but only if an employer’s
occupational sick pay scheme is equal to or more than SSP.
There would still be a requirement to keep appropriate records
etc.
We have outlined the general principles below but first we
need to explain some of the special terms used.
Glossary
of Terms
Period
of incapacity for work (PIW)
A PIW consists of four or more calendar days of sickness in
a row. These do not have to be normal working days.
Linking
Where one PIW starts within eight weeks of the end of a previous
PIW the periods can be linked.
Qualifying days (QDs)
These are usually the employee’s normal working days
unless other days have been agreed.
SSP is paid for each qualifying day once the waiting days
have passed.
Waiting days (WDs)
The first three QDs in a PIW are called waiting days. SSP
is not payable for WDs.
Where PIWs are linked it is only the first three days of the
first PIW which are WDs.
Who
Qualifies for SSP?
All
employees who at the beginning of a PIW or linked PIWs:
- are
aged 16 or over and under 65
- have
had average weekly earnings above the Lower Earnings Limit
(£79 per week in 2004/05 and £82 in 2005/06).
How
Much SSP is Payable?
The
weekly rate of SSP for the 2004/05 tax year is £66.15
but it is computed at a daily rate. For 2005/06 the rate will
increase to £68.20.
The daily rate
The daily rate may vary for different employees. It is calculated
by dividing the weekly rate by the number of qualifying days
in a week. For example an employee with a five day working
week would normally have a daily rate of £13.23 (£13.64
2005/06).
Only QDs qualify for SSP and remember the first three days
(WDs) do not qualify.
Maximum SSP
The maximum entitlement is 28 weeks in each period of sickness
or linked PIW.
Recovery of SSP
Employers falling within the limits of the percentage threshold
scheme can recover some of their SSP.
The general principle is that if in a tax month the SSP due
is more than 13% of gross Class 1 national insurance contributions
(NIC) the employer is entitled to a refund of the excess.
PAYE and records
SSP is included in gross pay and PAYE operated as normal.
A record of payments for each employee will be needed for
the completion of the PAYE end of year forms, where the employer
has claimed a recovery of SSP using the percentage threshold
scheme.
Statutory
Maternity Pay
SMP
is paid to female employees or former employees who have had
or are about to have a baby.
It is paid to women who have been in the same employment throughout
their pregnancy and is compulsory where the employee fulfils
certain requirements.
The
Requirements
SMP
is payable provided the employee has:
- taken
her maternity leave. No SMP is payable for any week in which
the employee does some work
- given
28 days notice of her maternity leave (unless with good
reason)
- provided
medical evidence with a form (MATB1)
- been
employed continuously for 26 weeks up to and including her
qualifying week
- had
average weekly earnings above the Lower Earnings Limit in
the relevant period.
The
Amount Payable
SMP
is payable for a maximum of 26 weeks at the following rates
in 2004/05:
- first
six weeks at 90% AWE (see below)
- up
to a further 20 weeks at the lower of:
- 90%
of AWE
- £102.80*
per week
*£106.00
from April 2005.
SMP
is treated as normal pay.
Average weekly earnings (AWE)
AWE need to be calculated for two purposes:
- to
determine if the employee is entitled to SMP (earnings must
be above the Lower Earnings Limit)
- to
establish the rate of SMP.
The
average is calculated by reference to the employee’s
relevant period. This is based on an eight week period and
will vary depending upon the employee’s pay periods.
Earnings for this purpose are the same as for Class 1 NIC
and include SSP but not Working Tax Credit.
Recovery of SMP
92% of SMP paid can be recovered by deduction from the monthly
PAYE payments.
Employers may qualify for Small Employers’ Relief (SER).
SER is 100% of SMP plus a 4.5% NIC compensation.
To qualify for SER, the current limits are:
- total
gross Class 1 NIC for the employee’s qualifying tax
year must be less than £45,000
- the
employee’s qualifying tax year is the last complete
tax year that ends before the start of her qualifying week.
Glossary
of Terms
Week
baby due
The week in which the baby is expected to be born. This starts
on a Sunday.
Qualifying week (QW)
The 15th week before the week baby due.
The week baby due and QW are easy to establish from the Revenue
SMP tables.
Maternity Pay Period (MPP)
The period of up to 26 weeks during which SMP can be paid.
MATB1
Maternity certificate provided by a midwife or doctor. This
is available up to 20 weeks before the baby is due. SMP cannot
be paid without this.
The
Future
Much
has been made of government plans to extend maternity leave
and pay. The first step will be an extension of the current
entitlement of 26 weeks to 39 weeks from April 2007.
How
We Can Help
As
both schemes are statutory it is important that rules are
adhered to and we will be more than happy to provide you with
assistance or any additional information required.
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