We continue to see employers who fail to deduct maternity pay contributions correctly.

For any member on maternity leave, the determining tier for deducting contributions is based on the member’s normal salary, however both member and employer contributions should be deducted based on the actual salary paid in that particular month

Some of you still deduct employer contributions based on the ‘full’ salary and not the reduced maternity pay and are therefore overpaying.

Our example below should help you to understand how to calculate the correct level of contributions to deduct, to prevent an overpayment of contributions occurring.

Example

Mary is on maternity leave, but her normal annual salary is £42,000 per year, putting her in the 8.9% contribution band.

Whilst on maternity leave, Mary’s salary reduces by half, meaning her monthly take home pay is now calculated at £1,750.

Mary’s contribution band remains at 8.9% as we calculate based on her actual annual salary, not her current maternity leave salary. Therefore, her contribution payment would be £155.75.

Some employers are calculating the contributions based on Mary’s full-time salary, which would put her in the 8.9% banding, but deducting that from her maternity pay, which would give a total contribution of £311.50.