DWP clears up maternity leave pension confusion

  • By: Rachel Dalton
  • 24 Aug 2011
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Woman working from home while holding a baby

The Department for Work and Pensions has confirmed when employers must pay pension contributions for workers on maternity leave after confusion over the law.

Pregnant women are entitled to statutory maternity leave, which consists of 26 weeks ordinary maternity leave and 26 weeks additional maternity leave.

Statutory maternity pay is 90% of the woman's average weekly earnings for the first six weeks. This then reverts to £128.73 per week, or 90% of the woman's earnings, whichever is lowest, for the next 33 weeks.

This leaves a period within AML of 13 weeks where the employer has no duty to pay its employee.

CBG Financial Services director Mike Carpenter said there is uncertainty among employers, advisers and legal firms about which periods of maternity leave count as pensionable service, when they must keep paying contributions.

He added without clarity from the authorities, employers and their advisers could run the risk of falling foul of employment law through ignorance.

However, the Department for Business, Innovation and Skills and the DWP have now confirmed when employers are obliged to make contributions.

BIS guidance says: "No contributions are required during a period of unpaid AML."

A spokesperson from HMRC provided more detail, saying new equality law has placed a duty on employers to pay pension contributions to a woman in OML even if she is not being paid a salary.

An HMRC spokesperson said: "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 woman on AML is only entitled to those employer contributions if she is paid."

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