Maternity leave and pension contributions

Relief at Source

Under a standard pension arrangement without a salary sacrifice scheme, during the paid maternity leave period (which can last up to 39 weeks), the employer is required to continue making pension contributions based on the employee’s usual salary, as though they were still working.

However, the employee’s own pension contributions are calculated based on the actual pay received during maternity leave. If the employee is only receiving Statutory Maternity Pay (SMP), their contributions will be based on 90% of their normal earnings for the first six weeks. For the remaining 33 weeks, contributions are based on either the SMP rate or 90% of normal earnings—whichever is lower.

Salary Sacrifice

Under a salary sacrifice pension arrangement, an employee agrees to reduce their gross salary in exchange for increased employer pension contributions. This arrangement means the employee does not pay income tax or employee National Insurance contributions (NICs) on the sacrificed amount, as it is paid directly into their pension. The employer also benefits by saving on employer NICs for that amount.

In practice, all pension contributions under a salary sacrifice scheme are treated as employer contributions, with no separate employee contribution element.

As employer contributions must be based on the employee’s normal salary, the total contribution—including the sacrificed portion—must continue throughout maternity leave.

If an employer chooses to remove an employee from the salary sacrifice scheme either before or during maternity leave to avoid paying higher employer contributions, this could give rise to claims of sex and/or maternity discrimination.