Any employee about to embark upon maternity leave is far from being alone in having to prepare for a period of change and uncertainty. Their impending absence will invariably also trigger a flurry of activity from their departmental colleagues and HR department.
Items on the to-do list range from the time consuming duties involved with recruiting suitable temporary cover to the more minor, but nonetheless oh-so-important, touchy feely things like organising a whip-round for a present for the pregnant individual and making sure than anyone who is anyone has signed their card.
It is therefore not altogether surprising that some employers can neglect their responsibilities towards the mother-to-be’s pension rights at such a time, and in the era of automatic enrolment the vast majority of working women will be a member of a pension scheme.
We have certainly dealt with new clients who we discovered had previously failed to realise their obligations in this respect.
In my experience such non-compliance is almost always the result of ignorance as opposed to wilful abuse and tends to be more of a problem with smaller businesses, and in particular, with international firms who don’t have HR or payroll staff with UK expertise.
Nonetheless, it can prove very costly. Failure to make the required employer pension contributions during maternity leave can result in a business having to make significant back payments and, because it is deemed to be sexual discrimination, also lays it open to potentially unlimited fines in the event of a tribunal.
Assuming that the employee concerned chooses to remain in the pension scheme, the employer must continue making pension contributions during all paid maternity leave, which currently means for 39 weeks of the total 52-week maternity leave period.
Although employers are not actually obliged to make payments during the last unpaid 13 weeks, it is important that they look at their contract of employment to check that they haven’t specifically agreed to do so.
There is also an argument that, even if the employment contract doesn’t commit to making pension contributions during the unpaid 13 weeks, it might be safer to make them anyway.
This is because, although pensions legislation indicates the employer doesn’t have to make pension contributions during the unpaid leave, this approach is not consistent with the treatment of other non-cash benefits. Payment of Childcare vouchers, for example, would have to continue for the full 52 weeks of maternity leave.
In the absence of any case law this issue has still not been entirely resolved and, although it should not currently be seen as a great cause of anxiety, it is worth noting that it remains surrounded by a degree of uncertainty.
Furthermore, all employer pension contributions made must continue at the same rate as they were before the paid leave. This means they must be based on the normal full pensionable earnings of the employee, although any matching employee contributions only have to be based on the Statutory Maternity Pay and any other top-up pay they may be receiving from the employer.
It is also important to realise that if companies allow salary sacrifice the employer still has to pay all of the pension contributions during the period of paid maternity leave. Employees cannot have Statutory Maternity Pay deducted because statutory payments are protected earnings.
These days most employees tend to be fairly clued up about the rights they have when they go on maternity leave and, even if they don’t notice they are failing to receive employer pension contributions whilst they are away, they are highly likely to when they get back.
Indeed, on their return to the workplace they will be given the chance to make extra employee contributions to make up for unpaid leave, and at this stage they are likely to pick up on the subject.
When this happens, even if employers avoid fines, they can find themselves faced with unexpected bills that can run into thousands of pounds.
Content correct at time of writing and is intended for general information only and should not be construed as advice.