HMRC’s guidance around calculating average weekly earnings (AWE) for maternity pay while dealing with mistimed payments has been amended.
CIPP News Article: https://www.cipp.org.uk/resources/news/hmrc-guidance-awe-statutory-payments-mistimed.html
Mistimed payments when calculating AWE
The CIPP materials team raised concerns with discrepancies in the guidance pages surrounding how to calculate an employee’s AWE when there is a mistimed payment, such as an early Christmas payday.
The guidance on the Statutory Maternity Pay (SMP) calculator explains that the normal payday should be used as the start of the relevant period, whereas the Statutory Payments Manual provided detailed examples which used the early payday as the start of the relevant period and included up to three monthly payments for a monthly employee.
The Statutory Payments Manual has now been updated to mirror the advice given on the SMP calculator, confirming that the normal payday is the start of the relevant period (not the early pay date).
The guidance in the HMRC Internal Manual provided incorrect dates and used an additional month in error in the example calculation. This guidance has now been corrected.
Underpayments and overpayments when calculating AWE
Additionally, a conflicting statement in the manual has now been removed which indicated that mistimed payments should not be used to calculate AWE. The correct process is outlined in the Statutory Maternity Pay guidance and states:
“Underpayments and overpayments
If there are over or underpaid earnings affecting the AWE which disadvantages either you or the employee, check if there’s documentary evidence agreeing to the amount that should have been paid.
If there is use the agreed earnings to calculate the AWE.
If there is not use the actual earnings.”
If you are calculating AWE currently and made payments earlier than the contractual pay date, this will be something that you need to consider.