Where an annual pay rise coincides with an employee's maternity leave will this affect their maternity pay?
Yes. If the effective date of a pay rise falls in the period starting with the beginning of the "relevant period" and finishing with the end of the employee's maternity leave, the employer must recalculate their average weekly earnings for statutory maternity pay (SMP) purposes to include the pay rise, as if it had been effective from the start of the relevant period. The relevant period is the period between the last normal pay day before the end of the qualifying week (the 15th week before the expected week of childbirth) and the last normal pay day at least eight weeks before that date.
Where a pay rise is awarded with an effective date before the beginning of the relevant period and the earnings in the relevant period have not yet been adjusted to take this into account, the pay rise must also be factored into the SMP calculation.
The higher, and in some cases also the standard, rate of SMP needs to be recalculated to take account of the employee's pay rise, even if SMP has already been paid. This means the employee's SMP must be increased retrospectively or that they may qualify for SMP if they did not previously. The employee should be paid a lump sum to make up any difference between the SMP already paid and the amount payable as a result of the pay rise.