Maternity leave pension confusion clarified by DWP

The DWP has Clarified Confusions Over Maternity Period Leave Pension Contributions

The DWP has Clarified Confusions Over Maternity Period Leave Pension Contributions

The Department for Works and Pensions has issued clarifications to dispel confusions on employers’ pension contributions for workers on maternity leave.

Pregnant female employees are entitled to 52 weeks of maternity leave, comprising of 26 weeks ordinary maternity leave and 26 weeks of additional maternity leave.

For the first six weeks, statutory maternity pay is 90% of the weekly average pay, which then reverts to 90% of the earnings or £128.73 per week, whichever is lower, for the next 33 weeks.

The clarification leaves 13 weeks within the additional maternity leave period when the employer is not bound to pay anything.

There is confusion among employers, legal firms and advisers about the maternity leave period that counts as pensionable service, and hence qualifies for compulsory employer contribution, said Mike Carpenter, director of CBG Financial Services.

Without clarity from authorities, advisers and employers may be inadvertently caught on the wrong side of employment laws, he added.

The DWP and the Department for Business, Innovation and Skills (BIS) have now clarified when employers are bound to make contributions.

“No contributions are required during a period of unpaid AML (additional maternity leave),” the BIS guideline says.

New equality laws mandate that employers make pensions contributions to a female employee’s pension account on ordinary maternity leave, even if she’s not being paid a salary.

“The Equality Act’s Maternity Equality Rule ensures a woman on OML is entitled to employer contributions to the scheme as though she were paid her usual salary, whether or not she is paid,” a HMRC spokesperson said.

“A woman on AML is only entitled to those employer contributions if she is paid,” the spokesperson added.

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