Pension contributions for employees on maternity leave still unclear - 09/09/2008

Pregnant employees with an expected week of childbirth of 5 October 2008 or later are now entitled to the same non-cash, contractual benefits (such as mobile phones, their company car, home PC, gym membership, health benefits and any contractual entitlement to holiday above the statutory minimum) during additional maternity leave as during ordinary maternity leave. However, uncertainty as to pension contributions remains.

In practice most employers have treated only paid maternity leave as pensionable (ie it is only during paid maternity leave that employers need make employers' occupational pension contributions, and only periods of paid maternity absence count as reckonable service), but not unpaid leave, although a few have treated all maternity leave as pensionable.

There is an argument that the new rules make all maternity leave pensionable. However, HM Revenue and Customs has published guidelines in relation to pension entitlement, which state that employers do not need to treat unpaid maternity leave as pensionable. There is widespread concern that they may be wrong.

Recommendations

• Employers providing occupational pension schemes should take advice on the effect of the new rules, and HMRC guidelines.

Related Resources

in the Muckle LLP Resource Centre

• Case law: employee dismissed for being 'too young'
• Case law: less favourable treatment of part-time workers
• Case law: unfair dismissal claim rejected where new terms and conditions imposed unilaterally
• Case law: offer to settle does not invalidate grievance letter