SPM21040 - Statutory Maternity Pay (SMP) – Paying SMP

Compromise Agreements on termination of employment

Statutory Payment (SP) rights remain regardless of any compromise agreement. They will still be payable by the liable employer unless the agreement stipulates and it is visible that the final payment includes the full entitlement of any SP due.

If an employee agrees to accept a compensation package on termination of her employment when she goes on maternity leave, the employer will only have met their liability to pay SMP if:

• the compromise agreement specifically states that the payment includes SMP, and
• NICs has been paid or is to be paid on the amount of SMP included in the payment, either as a deduction from the payment made to the employee or by the employer under the normal rules for tax and NICs on gross payments.

An employee does not have to claim SMP so they cannot waive their right to SMP by signing a general agreement "not to make further claims against their employer".

Each compromise agreement would need to be examined to see if the sum of money payable to the employee included the full entitlement to SMP. If it did, the agreement would not be rendered void and the employee should receive her full entitlement through the agreement.

If the compromise agreement did not include the full entitlement, then the agreement would be rendered void as far as the SMP entitlement was concerned and HMRC could rule in such a case that she was still entitled to receive her full SMP from the employer.

Any agreement which seeks to remove an employee's right to receive SMP is unlawful under the provisions of Section 164(6) & (7) of the Social Security Contributions andBenefits Act 1992.