The First-Tier Tribunal Tax Chamber has concluded that a settlement agreement purporting to apply to "all and any claims" did not negate the employer's duty to pay statutory maternity pay (SMP). Where a woman satisfies the conditions for SMP, an absolute right arises that cannot be excluded. However, part of the settlement sum could have been designated as SMP fulfilling the employer's SMP obligation. This had not been done, so the employer was obligated to pay SMP additionally.

The first six weeks of SMP are calculated as 90% of normal weekly earnings between 23 and 15 weeks before the expected week of birth. The employee had been paid a discretionary bonus (as contemplate in her contract) during this time, and as such it fell within the "normal weekly earnings" definition and was right to be included in the calculation of the 90% for SMP purposes.

What Should Employers Do Next?

Employers should ensure that settlement agreement payments explicitly include reference to including SMP, where relevant.

This case also serves as a useful reminder that bonus payments paid between 23 and 15 weeks before the expected week of birth must be included for the purpose of calculating the first six weeks of SMP payment.