What Is A Statutory Payment? Learning The Essentials

It is not uncommon for employees to witness certain life events that might discontinue their contact with their employment, such as illness, parenthood, or bereavement. However, it will not be fair to leave the employees financially strapped in such scenarios. That is where a statutory payment comes into play. In the UK, statutory payments are financial benefits that are legally mandated for employers to offer to eligible employees during specific life events. The purpose of these payments is clear: to ensure that employees receive a minimum level of income support during certain times when they are unable to work. Furthermore,  employers are responsible for administering these payments and can often reclaim a significant portion from HMRC. Therefore, this blog will centre around what is a statutory payment, its types, and the eligibility criteria to claim the statutory payments in line with HMRC guidelines.

 

 

What Is A Statutory Payment?

Statutory payments are a group of legally required payments for the employer to pay their employee for a number of different absences, including maternity, paternity, and adoption. Primarily, the statutory payments are defined payments, meaning they are predetermined or clearly specified in the employment contract. All employers are legally required to make these payments to employees who meet the qualifying conditions. More specifically, employers must ensure that the employees are getting at least the national minimum wage or the national living wage. Normally, if an employee is unable to attend work owing to various reasons, they will be paid at a weekly rate.

Moving on, when understanding what is a statutory payment, you must take the following key factors into account:

• There are different types of statutory payments, each with specific eligibility criteria for an employee. For instance, the qualifying conditions for statutory payments include an employee’s earnings threshold and their length of service.
• The government sets the payment rates for statutory payments and may change them periodically. As a result, you should also stay abreast of the current rates before applying.
• It is a legal obligation of all employers to pay statutory payments to employees meeting the qualifying conditions. Hence, all the eligible employees are entitled to the statutory payments.
• It is also noteworthy that each type of statutory payment comes with a specific duration or time constraints.

Types Of Statutory Payments:

When, on account of various reasons, an employee is off work, an employer must compensate them for it. These payments from the employer are called statutory payments. Accordingly, both employers and employees should be aware of the types of statutory payments and their associated qualifying conditions. The following are different types of statutory payments:

Statutory Sick Pay (SSP):

There might be times when an employee falls seriously ill and they may go off work for a prolonged period due to their indisposition. In such instances, employees receive Statutory Sick Pay (SSP) from their employer for a 28-week period. Importantly, the SSP rate is  £118.75, meaning an employer will have to pay  £118.75 per week Statutory Sick Pay (SSP) for up to 28 weeks to an employee in view of their serious illness.

In summary, the SSP is the minimum level of allowance an employee is paid as sick pay. However, while the minimum amount is £118.75, an employer can pay more than this, given they have entitled the employees to more than this amount in their contract.

Statutory Maternity Pay (SMP):

Fortunately, for all the mothers-to-be, their employers benefit them by giving them time off work and paying them under Statutory Maternity Pay (SMP) to let them have the blessing of motherhood and bond with their precious new baby. Statutory Maternity Pay (SMP) is for employees on maternity leave and is payable for up to 39 weeks. Principally, an employee on maternity leave will get 90% of their average weekly earnings for the first 6 weeks before tax is accounted for.

Thereafter, they will be entitled to £187.18 or 90% of their average weekly earnings, whichever is lower,  for the next 33 weeks. To go further, an employee will get SMP in the same way as their weekly or monthly wages. However, it is worth noting that this payment will be subject to income tax and NIC deduction. National Insurance will be deducted.

Besides, you can calculate how much you can get as SMP using the maternity pay calculator.

Statutory Paternity Pay (SPP):

Similar to the new mothers, the new fathers are also entitled to payments called Statutory Paternity Pay (SPP). It is for eligible employees on paternity leave. Primarily, the SPP rate is £187.18, or 90% of an employee’s average weekly earnings (whichever is lower). More importantly, Statutory Paternity Pay (SPP) is typically paid for one or two consecutive weeks. The employee can choose to take either one or two weeks of leave. While leave can start on any day of the week, it must end within 56 days of the baby’s birth. Similar to maternity pay, the SPP is also paid in the same manner as an employee’s wages, i.e. monthly or weekly. Nevertheless, the SPP is not exempt from income tax and NIC deductions.

To go further, for an employee to be eligible for the SPP, they must:

• Be employed by their employer till the date of birth of their child.
• Earn a minimum of £125 per week (before tax deductions).
• Give your employer the proper notice period. To clarify, in order to claim the SPP, an employee must give their employer at least 15 weeks’ notice.
• Have been consistently working for their employer for at least 26 weeks up to the end of any day in the ‘qualifying week’. Mainly, the ‘qualifying week’ is often the 15th week before the baby’s birth is expected.

To gain an insight into the paternity pay, you can read our all-encompassing guide:

• What is statutory paternity pay? Learn the essentials

Statutory Adoption Pay (SAP):

Statutory Adoption Pay (SAP) is to financially facilitate employees when they are adopting a child or having a child through a surrogacy arrangement. Fundamentally, the adoption pay is paid for a period of up to 39 weeks. It begins when an employee takes their adoption leave. To elaborate, employees receive 90% of their gross average weekly earnings for the first six weeks as SAP. Next, for the next 33 weeks, they get £187.18 a week or 90% of their gross average weekly earnings (whichever is lower). Keep in mind that tax and NI deductions are made. Moreover, SAP is given in the same way as maternity pay.

In order to claim the SAP, it is mandatory for an employee to apprise their employer that they want to take time off work to adopt a child and when they want to begin receiving their Statutory Adoption Pay. Beyond that, the employer reserves the right to ask the employee to give the notice period in writing and produce proof of the adoption. Consequently, the employee must serve a 28-day notice to their employer. Lastly, the employer is also obligated to confirm the amount an employee will receive as Statutory Adoption Pay within 28 days, as well as the start and end dates.

Statutory Shared Parental Pay (ShPP):

The paramount purpose of ShPP is to allow parents to share leave and pay. With ShPP, the employer intends to support parents who share the responsibility of caring for a child following the birth or adoption.

Mainly, the total duration of Statutory Shared Parental Pay (ShPP) is a maximum of 37 weeks. It is paid at a rate of either £187.18 per week or 90% of the employee’s average weekly earnings, whichever is lower. Income tax and National Insurance contributions are deducted from ShPP in the same way as regular wages. Moving further, you and your partner may be eligible for Statutory Shared Parental Pay (ShPP) if you are:

• Having a baby.
• Having a baby via a surrogacy setup.
• Adopting a child.
• Fostering a child for the purpose of adoption.

You can refer to the government website for further details on Statutory Shared Parental Leave and pay.

Statutory Parental Bereavement Pay (SPBP):

This payment is intended to compensate the employees who have suffered the misfortune of losing their child. An employee takes parental bereavement leave after:

• The death of a child, given that they die before the age of 18.
• A baby’s death after a brief period of birth. It can occur at any stage of pregnancy.
• A stillbirth after 24 weeks of pregnancy.

You can learn more about the SPBP by visiting the government website.

 

 

Conclusion:

To summarise, learning the fundamentals of what is a statutory payment is essential not only to retain the employer’s credibility and reputation but also to support the employees during certain occurrences. However, managing statutory payments can be strenuous, especially for small businesses without dedicated HR departments. Hence, to simplify things for you, the well-versed accountants at  Payrollservices.accountants offer expert payroll services to help employers:

• Accurately calculate and process statutory payments.
• Stay up-to-date with HMRC regulations and avoid penalties.
• Implement efficient payroll systems congruent with your business needs.
• Provide comprehensive guidance and support for any payroll-related queries or issues.

Ultimately, with the expertise of our certified accountants, employers can focus on their core business activities, confident that their statutory payment obligations are being dealt with professionally and compliantly.

Disclaimer: Please note that the information provided in this blog is exclusively for informational purposes and should not be considered financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.