SPM20835 - Statutory Maternity Pay (SMP) - Calculating Average Weekly Earnings (AWE): How directors are paid

Before you can calculate a director’s AWE, you must establish if the director is paid contractually or remunerated by annual voting, or both and when the company was incorporated, see SPM20836.

Paid contractually

If the director is contractually paid a regular salary calculate their AWE like any other employee, see SPM20815.

Paid both contractually and by formal vote

A director who is paid contractually may also be paid a bonus or fees by a formal vote. You must still calculate their AWE in the usual way for monthly or weekly paid but only include the monies voted by formal vote if the date of the vote falls in the relevant period.

Directors paid by a formal vote only

If the director is paid only by a formal vote calculate their AWE in the usual way. A formal vote usually takes place at the company’s Annual General Meeting (AGM) and is agreed in the company minutes.

Monies drawn in anticipation of a formal vote

Some directors may regularly draw money from the business in anticipation of a formal vote. This money should not be included when working out the director’s AWE, even if NICs were deducted at the time they were paid, see SPM10640.

To calculate their AWE:

• Find the date the baby is due
• Find the date of the Saturday in the QW
• Find the date of the last formal vote on or before that Saturday - this is the last day of the relevant period
• Find the date of the last formal vote at least eight weeks previously and come forward one day to establish the first day of the relevant period

• • the relevant period is the period between these dates inclusive

• Add together the money voted during the relevant period but do not include any money drawn in anticipation of a future vote
• Calculate the number of whole months in the relevant period, where there are not a whole number of months in the relevant period see SPM10630.
• Divide the earnings by the number of months in the relevant period to give the average monthly earnings
• Multiply the average monthly earnings by 12 to give an average annual earnings figure
• Divide the average annual earnings by 52 to give the AWE.