Can you claw back enhanced maternity/adoption pay?
If you agree to pay more than the statutory minimum during maternity/adoption leave, can you ask an employee to sign an agreement under which they agree to pay back the enhancement in certain circumstances?
Most small employers pay statutory maternity pay (SMP) or statutory adoption pay (SAP) only during maternity/adoption leave. However, you can agree to pay more than this. If you do offer enhanced maternity/adoption pay, you can require the employee to repay some or all of the enhanced amount, i.e. anything more than SMP/SAP, if they do not return to work either at all or for a minimum period of time after their leave ends.
To do this, you must either include suitable repayment wording in their employment contract (if enhanced pay is a contractual right) or ask them to sign a clawback agreement governing the repayment terms in advance of their leave starting (if enhanced pay is discretionary). Your wording may state, e.g. that the enhanced pay element is repayable should the employee either not return to work at all after their leave or not return for a minimum period, e.g. six months. To be reasonable, you could limit repayment to apply only where the employee resigns, and provide for pro rata repayment based on the length of return to work. SMP/SAP cannot be clawed back under any circumstances. You should also provide in the contract/agreement for the owed amount to be deducted from the employee’s outstanding wages (if there are any), with any outstanding balance remaining then to be repayable by them within, say, one month of employment termination.
Related Topics
-
CT61
-
Government finally confirms date for capital goods scheme reforms
The government has finally confirmed when long-awaited changes to the capital goods scheme (CGS) will take effect. The reforms, first announced as part of a wider review of VAT simplification, will come into force on 29 July 2026. What does this mean for businesses?
-
The tax‑free perks league table
You know that there are certain items or services your company can pay for without incurring a tax charge, but you’re hazy on the details. What are the most valuable tax-free perks for owner managers and which ones are you missing out on?