PayPerShop Forum

We have an employee who is being made redundant on 31/07/08, however she is also pregnant with an ewc date of 22/09/08.

When we pay the employee her redundancy payment in her July salary is it also possible to pay her 39 weeks SMP with this payment too? (I think this is what she is expecting to happen)

If not should we issue her P45 with her July payslip and then tax her on BR for the next 39 weeks and deduct NI using the monthly tables, as she is monthly paid?

Richard,

This is not an uncommon event surprisingly, and probably will become more common over the next few years because of the economic situation.

You have obviously already established that she is entitled to her SMP even when she leaves but the issue of how to pay her is, I feel, a little more difficult.

Page 29 of the E15 booklet makes it clear that payment must be made, though she will obviously not be getting maternity leave as such. As you say, you can agree to make payment as a single lump sum, however, the conditions, on page 33 of the booklet, about not working for another employer during the SMP period still apply. As soon as she starts working for someone she loses her entitlement to further SMP payments and whilst this is always difficult for an employer to establish we have to accept that revenue will know from her substantive tax record.

Remember that the 92% or 104.5% recovery of SMP is based on a correctly calculated adn paid sum of SMP, which is not necessarily the amount the employer actually pays. It means that if, subsequently, revenue establish that the calculation was wrong, or that some other condition was, or was not satisfied (for example the employer gets the KIT days rules wrong) then revenue are entitled to ask for the recovery back, plus interest and penalties for getting it wrong in the first place.

After being made redundant, and having her baby, the employee is perfectly entitled to go and work for someone else just as soon as she decides she is fit and well enough to do so and that means any payments made to her after her start date, or any payments deemed to be due for that period are not recoverable. They are not due to her either but there is nothing to stop your employer from deciding that it is too much trouble to try and recover it. This does not affect the fact that the recovery is not longer allowed.

The only other issue is the employers NIC which can be much higher in a lump sum payment than if it is paid over the normal period of time. The advantage of making the payments over the correct period of 39 weeks means you can justifiably with hold the P45, because you have not finished paying her and that means having some means of establishing her future employment circumstances. Have to say though that such a move is not guaranteed because a strict adherence to revenue rules would mean issuing the P45 as soon as is practicable after leaving and putting her on BR for the balance of the MPP.

To me the rules are very complex and there are too many areas where the employer can fall into a penalty situation which is not of their making.

I would suggest getting a revenue ruling in writing telling you exactly what you should pay and when, what to do with the P45 and exactly who is liable if she subsequently, without any chance of you knowing, takes on future employment whilst still, technically, in the MPP. That way your employer may still have to pay part of the recovery back but will escape penalty.

Anyone else have any other ideas in this situation?

Ian Whyteside

For all the reasons that Ian has explained, I always recommend that employers pay SMP in instalments, not as a lump sum. Your employee should be given a detailed schedule of how and when the payments will be made over the 39 weeks and, in addition, you should make it clear that the law requires her to notify you if she takes a job during the maternity payment period. You can state that the obligation is on her to do this and, in the nicest possible way, stress that she is committing fraud if she continues to accept SMP from you if she is working at the same time.

Pages 33 and 35 of this year's E15 booklet is helpful with these points.

Instructions on issuing form P45 in these circumstances is to be found on page 23 of this year's CWG2 booklet. It says that, if you are paying SMP in instalments and the employee asks for a P45 when the employment ends, you must deduct tax at basic rate thereafter. If the employee does not ask for a P45, you can deduct tax using the employee's tax code. But do read the more detailed instructions.

Thank you both for your replies.

I have advised our HR dept of your advice and they have said:

"I think the difficult is her employment will end on 31 July. By continuing to pay her maternity pay on a month by month basis she will remain an employee to the end of her maternity period. In which case her leave date will be at the end of that nine month period, and we would need to recalculate her right to redundancy and make her redundant at that point."

Is this correct?

No, it isn't correct. If her job becomes redundant during maternity leave, it should be handled at the time - she is still in full employment and retains all of her employment rights and contractual rights (with the exception of remuneration). She should be treated in exactly the same way as anyone else being made redundant. She should be offered a suitable vacancy, if one is available - even though she is entitled to stay off work for the remainder of her period of leave. If there is no job available, she should be give the appropriate notice period and paid any amount of statutory redundancy pay to which she is entitled.

If she is made redundant, her employment ends at that time. It does not continue just because you are continuing to pay her SMP month by month beyond that date. As we have already indicated, you may issue the P45 at the time of the redundancy or retain it until the end of the maternity pay period. Issuing the P45 at the end of the maternity pay period does not mean that her employment has continued until that time.

See Acas guidance at http://www.acas.org.uk/index.aspx?articleid=1753