Mastering Occupational Maternity Pay: A Guide for Employers

What is occupational maternity pay?

Occupational or contractual maternity pay, or OMP, is a form of financial support offered by employers to expectant mothers during their maternity leave. Unlike statutory maternity pay (SMP), which is a mandatory government scheme, OMP is an optional benefit provided based on the terms of your employment contract. 

By choosing to offer OMP, you demonstrate your commitment to supporting your employees throughout this significant life event, empowering them to focus on their families without the added burden of financial stress.

Difference between statutory maternity pay and occupational maternity pay

Understanding the distinctions between Statutory Maternity Pay (SMP) and occupational maternity pay is vital for employers, HR professionals, and small business owners. 

SMP is a legal requirement that provides eligible employees with financial support for up to 39 weeks during their maternity leave. The government funds the maternity scheme and regulates it, offering a standard pay rate or a percentage of the employee's average earnings, whichever is lower.

On the other hand, OMP, also known as enhanced maternity pay, is an enhanced benefit that goes beyond the minimum requirements of SMP. As an employer, you have the flexibility to design OMP according to your company's policies and financial capabilities. This means you can choose to provide a more generous payment to support your employees during their maternity leave. 

Offering OMP can strategically attract and retain talent, foster employee loyalty, and create a positive work environmentwhere working mothers feel valued and supported.

Legal framework and eligibility of occupational maternity pay

As an employer, offering staff Occupational Maternity Pay (OMP) demonstrates your commitment to supporting your valued employees during their maternity leave. However, since OMP is an optional payment, there is no set figure for it. 

When deciding to provide OMP, it's essential to take the time to consider the rate you'll pay for each stage of your employee's maternity leave. Keep in mind that in addition to OMP, you are also obligated to pay SMP to eligible employees.

Who is eligible for occupational maternity pay?

As per the UK government's NHS guidelines on occupational maternity pay, you qualify for NHS OMP if you have had continuous employment within the NHS for 12 months (not necessarily within the same Trust) before the 11th week before your expected week of childbirth. Additionally, you must have the intention to return to NHS employment for a minimum of 3 months after your maternity leave.

How much is occupational maternity pay entitlement?

The specific amount of maternity allowance you choose to offer will depend on your company's policies and financial capabilities. Some employers may choose to match the SMP rate, while others may opt for a more generous payment to provide additional support for their employees during this important life event. 

You have the freedom to determine the amount you offer your staff, and it doesn't have to be a fixed payment. You have the option to provide a mix of their full pay and half pay, tailoring the arrangement to best suit your company's policies and resources.

It's important to strike a balance that aligns with your organization's resources and values, ensuring your employees feel valued and cared for during their maternity leave.

How long does OMP last?

As OMP occupational maternity pay is not mandated by law, there is no set period where you are required to pay it. In the UK, employees are entitled to receive SMP for a maximum of 39 weeks, but they can take up to 52 weeks of maternity leave.

As an employer, you have the flexibility to use OMP to extend your employees' maternity pay beyond the 39 weeks covered by SMP. This extended financial support can greatly benefit your employees and foster a positive work-life balance, promoting their well-being and loyalty to your organization.

Example of an OMP plan

The structure of your OMP plan can vary based on your company's preferences and policies. You can choose to design it in a way that complements your overall employee benefits package.

For instance, you might decide to provide a percentage of an employee's normal salary for a specific duration during their maternity leave. It's important to remember that while offering OMP, you must continue paying SMP for the first 39 weeks of your employee's maternity leave, as this is a legal requirement.

Repayment clause for OMP

Some employers may choose to include a repayment clause in the employee's employment contract related to OMP. This clause stipulates that employees will need to pay back a portion of the OMP they received if they decide not to return to work after their maternity leave is over.

If you decide to implement this clause, being transparent with your employees about the conditions attached to their OMP is crucial.

You could also consider offering part of the allocated OMP as a return-to-work bonus to encourage a smooth return-to-work transition. This incentive can motivate employees to come back to work after their maternity leave, helping you retain valuable talent and maintain a supportive work environment.

Useful Read: Phased Return to Work: Balancing Employee Health and Business Needs

Calculating occupational maternity pay

1. Determining average weekly earnings:

To calculate occupational maternity pay for an eligible employee, the first step is to determine their average weekly earnings. This figure is crucial as it forms the basis for their OMP entitlement. 

Consider the employee's gross earnings over a specific reference period to calculate average weekly earnings. Typically, this reference period is the eight weeks leading up to the end of the qualifying week, which is the 15th week before the expected week of childbirth.

Add up the total gross earnings (before tax and deductions) for parent employees during these eight weeks and divide the sum by eight to obtain the average weekly earnings. It's essential to include regular pay, overtime, bonuses, and any other taxable benefits the employee received during this period.

2. Impact of tax and national insurance contributions:

OMP, like other forms of earnings, is subject to income tax and National Insurance contributions (NICs). The employee will be taxed on their OMP as if it were regular pay, according to the prevailing tax rates and thresholds.

An employer must ensure that the correct amount of income tax and NICs are deducted from the employee's OMP. You can use the employee's tax code to calculate the appropriate amount of income tax to deduct, and you must also consider the employee's National Insurance category and applicable rates.

Must Read: Understanding UK Tax Codes: A Comprehensive Guide

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Conclusion

Occupational maternity pay is a powerful tool that demonstrates your commitment to supporting working mothers. Providing financial security during maternity leave, OMP fosters a positive work environment and promotes employee loyalty. 

Calculating OMP requires attention to detail, considering average weekly earnings and accounting for tax and National Insurance contributions. Embrace OMP as an investment in your employees' well-being and the success of your organization, creating a workplace that celebrates and supports working parents.