New rules for taking pay rises into account when calculating maternity pay

The Statutory Maternity Pay (General) (Amendment) Regulations 2005, which come into force today, change the rules for calculating maternity pay.

The level of a woman's maternity pay is calculated on the basis of her average earnings, and to establish her average earnings a specific 'reference period' is looked at. This period, rather confusingly, is the eight-week period leading up to the 14th week before the expected week of childbirth.

Until now, if a woman received a pay increase after the end of the reference period, the increase would not be included in the calculation of her average pay, and therefore would not be reflected in her maternity pay, unless backdated to apply to the reference period.

Following the decision of the European Court of Justice in Alabaster v Woolwich plc, the new regulations provide that a woman should get the benefit of a pay rise which takes effect (or would have done so had she not been absent on maternity leave) at any time from the beginning of the reference period to the end of maternity leave.

This will affect many employers. From now on, whenever an employer implements a pay rise, it should analyse the effect of that pay rise on every woman who is pregnant and working during the reference period, or on maternity leave. There may well be cases where maternity pay must be recalculated.

A further twist is that decisions of the European Court may be legally binding for past periods, so even if a woman's maternity leave has finished, she might approach her employer to review the amount of maternity pay she received. This retrospective aspect should be clarified shortly by the Court of Appeal.

The Department for Work and Pensions has guidance at http://www.dwp.gov.uk/lifeevent/benefits/ecj_judgement.asp and the regulations are available at http://www.legislation.hmso.gov.uk/si/si2005/20050729.htm

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