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Don’t Forget Pensions When an Employee is on Maternity Leave

DMFS - pensions on maternity leave

An employee set to take maternity leave is a wonderful, albeit stressful situation. The expectant mother has so much to do in preparation for her bundle of joy, but so do you as the employer. Beyond the run-of-the-mill baby shower send off, employers need to organise all the necessary administration associated with maternity leave, including sorting out their employee’s pension.

This does not constitute advice and advice should be sought in all instances before acting on it.

Tips for employers

One of the first steps upon hearing the news of their upcoming maternity leave (after congratulating the mother-to-be, of course) is to check whether or not they’re enrolled in a pension scheme and to confirm what your duties are as an employer.

You do not want to be unprepared and caught out as many small business owners tend to be.

It’s important you stay on top of this because if you are required to make contributions to the employee’s funds and you aren’t actively doing so whilst they are on leave, you’ll be responsible for the retroactive payments for the entire time.

Not only that, but you are opening yourself up to a potential sexual discrimination case and an even bigger financial burden in the form of fines and fees.

It is the responsibility of the employer to continue pension contributions at the same rate as during employment for the paid portion, 39 weeks, of an employee’s available 52-week maternity leave, should the employee choose to continue with their scheme.

Some companies might even elect to continue payments for the additional 13 weeks, so both parties should thoroughly read employment contracts and plan accordingly as other non-cash benefits are not all treated the same.

Pension contributions, as mentioned above, need to be consistent during leave, which means the payments are to be based on the employee’s standard pensionable earnings. However, when it comes to matching contributions, employers are only required to base those on Statutory Maternity Pay along with any other “top-up” payments the employee is entitled to.

When it comes to salary sacrifice, the employer is not off the hook: they must still make pension contributions whilst their employee is on leave and since Statutory Maternity Pay is classed as protected earnings, it is not eligible for deduction.

Continued pension contributions are just one of many considerations during maternity leave, but they are certainly very important and shouldn’t be treated as an afterthought. We’re here to ensure both employers and employees are aware of their rights.

Don’t hesitate to reach out to us to understand more about the obligations of an employer during an employee’s maternity leave and how to plan for each case.

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