Understanding statutory payments in payroll
Managing payroll is one of the most important responsibilities of an employer from a legal standpoint, as well as contributing to the financial well-being of your employees. This includes making sure that all statutory payments are calculated correctly and paid on time.
Last year alone showed a decrease in compliance over pay days, with only 57.92% indicating that they always use the contractual pay date, even when payment must be paid early due to national holidays. Paying on time is critical, especially for those in receipt of benefits, such as universal credit, to coincide with their statutory pay, as a delayed payment can affect government assistance.
Payroll Solution Services is your trusted partner, we are here to help you understand statutory payments so that your business can remain compliant, and do right by your employees.
What are statutory payments?
Statutory payments are a group of payments that are required to be paid for a range of different types of absences. Statutory pay can include the following:
Statutory Sick Pay
Statutory Maternity Pay
Statutory Paternity Pay
Statutory Adoption Pay
Neonatal Pay
Statutory Bereavement Pay
All employers are legally required to make these payments to all employees who meet the qualifying conditions. The qualifying conditions differ depending on which type of statutory pay the employee is requesting, but certain requirements for eligibility include the employee’s earnings threshold and their length of employment.
If the employee is eligible, all companies must pay the employee in line with government regulations. Government regulations may change periodically, so it is important to stay up to date with current regulations. Any statutory payments will be calculated on a weekly basis however, they are paid at the same time as an employee's typical paycheck, e.g, weekly, biweekly, or monthly.
How long are employees entitled to statutory payments?
This differs depending on which kind of statutory pay the employee has applied for. If the employee is eligible for Statutory Pay, they can expect to receive the following:
Statutory Sick Pay - up to 28 weeks paid.
Statutory Maternity Pay - up to 39 weeks paid, but up to 52 weeks total leave
Statutory Paternity Pay - up to 2 weeks paid.
Adoption Pay - same as Maternity Pay
Neonatal Pay - on top of Maternity or Paternity Pay. One week’s leave for every 7 full and continuous days your baby is in neonatal care, paid up to 12 weeks.
Statutory Parental Bereavement Pay - up to 2 weeks paid.
Types of statutory payments
Statutory sick pay
To claim statutory sick pay (SSP), the individual must be classed as an employee of the employer. This means anyone under a freelance contract might not meet the requirements however, agency workers are entitled to SSP. The employee must also earn at least £125 a week and have reported to be ill for more than 3 days in a row.
If your employee meets the eligibility criteria, they can get £118.75 per week on Statutory Sick Pay. Employees cannot get less than the statutory amount however, if the employer's contract has its own enhanced sick pay scheme, they could be eligible for this.
Statutory maternity pay
Whilst every employee is eligible for maternity pay once they become pregnant, not everyone is entitled to the same maternity pay.
To be eligible, you must: earn £125 a week, have given the correct notice to your employer, provided your MatB1 form from your midwife to the employer, and have been under employment with the same employer continuously for 26 weeks, continuing into the ‘qualifying week’. The qualifying week is the 15th week before the employee's due date.
Maternity leave can be taken up to a total of 52 weeks, with Statutory Maternity Pay being paid up to 39 weeks.
The payment breakdowns for Statutory Maternity Pay are:
90% of the employee’s average weekly earnings (before tax) for the first 6 weeks
£187.18 or 90% of your average weekly earnings (whichever is lower) for the next 33 weeks
Employees cannot receive less than the government requirements if they meet eligibility however, the employer's contract could offer its own enhanced maternity benefit. If the employee isn’t eligible for statutory maternity pay, they may be eligible for Maternity Allowance, which is paid by the Department of Work and Pensions.
Statutory paternity pay
Statutory Paternity Pay requires the same eligibility criteria as maternity pay, except providing a MatB1 form. Instead they must simply communicate that they are the intended secondary parent to the baby.
Paternity pay is paid for only 2 weeks, with talks in Parliament on whether this is set to change in the future. The statutory weekly rate of Paternity Pay is £187.18, or 90% of your average weekly earnings (whichever is lower).
Statutory adoption pay
Statutory Paternity Pay requires the same eligibility criteria as maternity pay, except providing evidence of the adoption instead. Statutory Adoption Pay is paid for up to 39 weeks with the payments being the same as statutory maternity pay unless the employer’s contract offers enhanced adoption pay:
90% of their average weekly earnings for the first 6 weeks
£187.18 or 90% of their average weekly earnings (whichever is lower) for the next 33 weeks
Statutory neonatal pay
Neonatal Pay is on top of any maternity or paternity pay for babies born in need of neonatal care. Neonatal pay and leave is worked out as one week’s leave for every 7 full and continuous days your baby is in neonatal care. This is paid up to 12 weeks. Employees will receive either £187.18 a week or 90% of their average weekly earnings (whichever is lower).
Statutory parental bereavement pay
Statutory parental bereavement pay is for parents who have lost a child under the age of 18 or experienced a stillbirth after 24 weeks of pregnancy. The payment for the 2 weeks on bereavement leave is either £187.18 a week or 90% of their average weekly earnings (whichever is lower) if you’re eligible.
For more information, see the UK government website.
Employer responsibilities for statutory payments for payroll
When it comes to the responsibilities of the employer for statutory payments, several factors must be considered. This includes:
Ensuring that the employee meets any legal eligibility requirements.
Paying at the set statutory rates, which can change periodically.
Make sure to reflect any tax code changes when paying statutory contributions.
Where needed, communicating with the Department of Work and Pensions.
How Payroll Solution Services can help
Payroll Solution Services are much more than just a service provider. We are your trusted partner who takes care of your payroll, leaving you to focus on growing your business without worry. Our focus on accuracy and reliability means your employees receive what they’re entitled to, and your business stays fully compliant.
From Statutory Sick Pay to Maternity Pay and other statutory entitlements, we ensure all payments are processed correctly, on time, and in full compliance with current government legislation. As part of our service, we also help your company to reclaim statutory payments through HMRC with many employers reclaiming up to 92% for Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption Pay.
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