Statutory Maternity Pay - The 'Alabaster' Judgement and SMP paid for past periods

Following the European Court of Justice decision in the case of Alabaster the Statutory Maternity Pay (General) Regulations1986 were amended from 6 April 2005.

As a result the SMP average weekly earnings calculation must now take account of pay rises awarded, or which would have been awarded to a woman had she not been on maternity leave, if:

• the pay rise falls between the start of the 8 week set period for calculating SMP and the end of her statutory maternity leave. (that is to say her ordinary maternity leave and any additional maternity leave applicable in her case).

Consequently from 6 April 2005 if an employer grants a pay rise, or if before that date he had granted a pay rise which had not then been put into payment, the employer must establish if the effective date of that pay rise falls between the start of the period used to calculate a woman's SMP and the end of her maternity leave.

If the effective date of the pay rise does fall within that period then the employer must take account of that pay rise in calculating or re-calculating the woman's SMP.

Legal advice has now been obtained by DWP on what employers are advised to do about SMP paid before the amending legislation took effect.

The advice is that the time limit for bringing any claim for the re-calculation of SMP in the light of the Alabaster judgement is six months after the last day a woman was employed in the employment in respect of which the claim is made. Where such a claim is made the limitation on any arrears (whether the woman is still employed or has left employment but is within time to claim) is six years from the date the claim is made.

An employer may be asked by a woman to recalculate SMP paid where she believes that a relevant pay increase should have been taken into account when calculating the amount paid.

The amending legislation itself is not retrospective and therefore there is no general requirement on employers to re-calculate SMP for past periods. However, in the light of the Court of Appeal's judgement employers are advised to consider a specific claim for SMP arrears as follows:

For former employees: a claim must have been made within 6 months of their leaving employment.

For current employees: a claim can be made in relation to SMP payments up to 6 years before the claim is made.

However, if the six year point falls within a woman's Maternity Pay Period, the woman will also be entitled to a recalculation (provided she can substantiate her claim). But in these cases she will only be entitled to receive any enhanced payments for those weeks within the Maternity Pay Period which fall within the period of six years of the date of her claim.

Employers are of course only obliged to keep SMP records for 3 years after the end of the tax year to which they refer. Therefore if a woman makes a claim in respect of a period before her employer is likely to have the necessary records, we believe it is reasonable for the employer to ask the woman to provide sufficient evidence to substantiate her claim in order to allow her employer to re-calculate any SMP due.

Employers are of course entitled to recover any arrears of SMP paid on the basis of such requests in the normal way.