How are Employer Contributions calculated when SMP is being taken?
Employer contributions must be calculated based on the employees normal earnings before they went on maternity leave, plus the sum of any additional pensionable elements for the period. This is different to employee contributions, which are still taken based on the period pay (inclusive of reduced SMP).
This calculation approach in line with established legislative guidance.
Period Calculation Example (Monthly)
Formula |
((Annual Salary / 12) + Sum of "pensionable" elements this period) * Employer Contribution % |
Example
Annual Salary = £30,000
Pensionable changes this period = £500
Employer Contribution Percentage = 4%
Let's start by ascertaining the employer pensionable pay for the period:
Employer Pensionable Pay |
((£30,000 / 12) + £500) = £3,000 |
Now that we know the employer pensionable pay is £3,000, we can work out the Employer Contribution based on the %:
Employer Pensionable Pay * Employer Contribution % |
£3,000 * 0.04 = £120 |
So in this example, the Employer Contribution would be £120.