Expert advice from Ceridian Payroll expert, Simon Parsons
SMP Rate Changes
The last month has produced some interesting debate around the payroll calculation of SMP. Some sources claim that HMRC or another professional body (such as the IPP) have advised that all payments in April of SMP are to use the new SMP rate. But is this true? Ceridian Payroll expert Simon Parsons assures us that this is not the case.
The official HMRC/DWP instruction can be found here.
Simon Says:
Some confusion may be happening around the term “payment weeks starting”. This reference is to the entitlement of 
SMP payment (i.e. what maternity week period of leave is being covered) and not the actual point of payment. Equally, confusion may have stemmed from the fact that the rate changed in 2007 on Sunday, 1 April 2007. This annual date for SMP change is always a Sunday date.
According to the HMRC instruction document, the amount of SMP paid to an employee for payment weeks starting on or after Sunday 6 April 2008 is:
- First 6 weeks of payment
- The earnings-related rate, which is 90% of the employee's average weekly earnings
- Remaining weeks
- The lesser of the standard rate which is £117.18 a week, or the earnings-related rate, which is 90% of the employee's average weekly earnings
So for the SMP weekly entitlement starting on or after 6 April 2008, the 2008/2009 rates should be paid. This will be the case no matter when the actual payment is made.
Equally, for entitlement weeks (the start of the week) which fall for the weeks before 6 April 2008, the 2007/2008 rate is to be used no matter when the amount is paid.
How to calculate
It is entirely feasible that a monthly payroll in April may contain SMP lower-paid rates that are a mixture of old and new tax year rates. This has always been the case and Ceridian payroll automatically calculates the correct amounts to be paid. Any other operation is non-compliant with statutory rules and therefore incorrect.
So an employee receiving SMP at the lower rate through April 2008 (pay period is 1-30 April for this example) and has SMP weeks due from 1 April 2008, may receive 1 week at the old rate £112.75 and a further 3 weeks at the new rate £117.18 making a total of £464.29.
Some challenge that a single week that crosses the 6 April 2008 date should use a mixture of part old and part new rate (as there is now an any day start). This is incorrect. SMP is based on weekly entitlements (even when paid as part weeks) and the payment rate for the actual full week is determined by the date of the start of the full week.
For example, an SMP payment week starting on 5 April is paid at the old rate (5-12 April). An SMP payment week starting on 6 April (6-13 April) is paid at the new rate. There is no split year rate of payment for the same SMP payment week. Ceridian Payroll automatically calculates and applies the correct statutory payment rules dependent on the provision of accurate setup data.
Use our SMP dates calculator to help you get to the right calculation.
If you'd like to know more about HMRC changes, please contact your Ceridian representative.
Not a customer? Call us on 0800 0482 737, or contact us online.
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