Can a company director raise her salary six months before going on maternity leave so as to get more maternity pay and can the company still reclaim it?

Can a company director raise her salary six...

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Can a company director raise her salary six months before going on maternity leave so as to get more maternity pay and can the company still reclaim it?

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Euan's picture
By Euan MacLennan
12th Jun 2014 09:41

Yes & Yes

... but the higher 90% of average earnings only applies to the first 6 weeks of SMP, after which it falls back to the standard rate (of £138.18 in 2014/15).

The rate of recovery depends on the employer's total Class 1 NIC liability for the previous year (2013/14).  Assuming that it was less than £45,500, the employer can recover 103% of the SMP paid, otherwise 92%.

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By chatman
12th Jun 2014 09:54

Thanks Euan.

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By Steve Kesby
12th Jun 2014 11:48

Why six months?

Don't you just look at the 8 weeks prior to the earlier of the actual and expected birth dates to calculate the average earnings for the purposes of SMP.

The only unknown will be the actual date of birth, and babies can be born prematurely, but not 6 months.

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Euan's picture
By Euan MacLennan
12th Jun 2014 12:10

Because ...

... it is the 8 weeks before the Qualifying Week which is 15 weeks before the baby is due.  OK not quite 26 weeks, but 6 months is a reasonable approximation.

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By Steve Kesby
12th Jun 2014 12:40

Ah!

Thanks Euan. I see now. Does the qualifying week move if the baby is born early?

It seems to me that if you know exactly when the eight week period is, then that period is all you need to worry about?

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Replying to IANTO:
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By Kirkers
12th Jun 2014 12:47

Because..

Steve Kesby wrote:

Thanks Euan. I see now. Does the qualifying week move if the baby is born early?

It seems to me that if you know exactly when the eight week period is, then that period is all you need to worry about?

Having claimed maternity pay myself, my qualifying week did not change even though my daughter was born 3 weeks early.

I imagine it is because by that time you have already started to receive SMP - would be a pain to keep fiddling it.

On the same note.. if the baby is 2 weeks overdue you could also risk having used the 'wrong' 8 weeks as such.

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Replying to IANTO:
Euan's picture
By Euan MacLennan
12th Jun 2014 14:16

No

Steve Kesby wrote:

Thanks Euan. I see now. Does the qualifying week move if the baby is born early?

That is why I said "15 weeks before the baby is due". :¬)

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By dnicholson
12th Jun 2014 12:52

Certificate date
The due date has always been the certificate date, not the baby born date.

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By Steve Kesby
12th Jun 2014 13:02

Thanks all...

... I've obviously confused myself along the way!

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By neiltonks
12th Jun 2014 13:50

Planning

There's anecdotal evidence that this kind of planning happens quite commonly in businesses which have large annual bonuses (banking, city traders etc.) Ladies try to conceive about three months before the bonus is due to be paid, so that the 'relevant period' for SMP includes the month which contains the bonus. When successful, the strategy can be worth a significant amount of money if the bonus is hundreds of thousands of pounds, or even millions.

It's been suggested from time to time that the '90% of pay' should be capped, or that irregular payments be excluded, but nothing has ever come of it.

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By JCresswellTax
12th Jun 2014 14:29

It's all a bit unrealistic though

Unless a bonus is put through (which can be justified) what's the commercial reason for a short salary increase for it then to be reduced again?

It seems a bit of a fiddle to me.

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Replying to DH242:
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By MattG
12th Jun 2014 15:17

.

JCresswellTax wrote:

Unless a bonus is put through (which can be justified) what's the commercial reason for a short salary increase for it then to be reduced again?

It seems a bit of a fiddle to me.

 

Wasn't there a scheme called something like the 'bump plan' to take advantage of just this situation with a large bonus? I seem to recall it involved somebody giving a talk who was on a government consultation committee, he referred to keeping the chancellors "grubby mitts" of their money and subsequently ended up having to stand down from the committee, though I could be confusing two different stories....

 

Mid post I've remembered that amazing search tool 'Google' (you may have heard of them....) I was right:

 

https://www.accountingweb.co.uk/anyanswers/question/what-bump-plan

 

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