Employees are not entitled to ‘wages or salary’ during maternity leave (both OML and AML). If they meet the qualifying conditions they will be entitled to SMP instead. This will not be affected by the new rules.
In theory, a bonus which falls due during maternity leave counts as ‘wages or salary’ and is therefore not payable. However, there have been some decisions of UK courts and the ECJ which have complicated this position.
If the bonus relates to a period of time before the employee started maternity leave, then you must make the payment in full even if she is on maternity leave when the payment falls due.
If the bonus relates to a period of time which includes a period of maternity leave then you must make a payment on a proportionate or pro-rata basis to reflect the proportion of the time when the employee was:
- working;
- on compulsory maternity leave (i.e. the 2/4 week period immediately following the birth); or
- suspended on pregnancy or maternity grounds.
It does not matter whether the bonus is contractual or discretionary.
This may mean that you have to make an assessment of the employee’s performance over a shorter period of time than would normally be the case.
Performance measures such as sales targets or achievement of objectives are typically set at the beginning of the year on the assumption that the employee will be at work for the whole year. Where the payment of bonus is dependent upon the employee achieving such targets/objectives, you need to adjust them downwards or judge what the employee’s performance would have been had she been at work.
Where a bonus is not directly related to personal performance, the position is more complicated. In one case concerning the relocation of Kays Catalogue from its original base in Worcester to a new site in Manchester, the employer offered a discretionary bonus to all employees who cooperated in ensuring an orderly and effective transfer and who remained in post until the relocation date. Two employees were on maternity leave throughout this time and did not receive the bonus.
According to the Employment Appeal Tribunal, it was sex discrimination not to provide the bonus. This case is at odds with the principle that women are not entitled to ‘wages or salary’ for maternity leave and it may have been wrongly decided. However, it is still binding on employment tribunals and so employers offering similar loyalty bonuses should pay them to women on maternity leave.
Occasionally employers make payments which are genuinely intended as gifts, such as certain Christmas bonuses. In our view, these should also be paid to all women on maternity leave.
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