Statutory Adoption Pay: how different employment types affect what you pay
Some employment types like agency workers, directors and educational workers, have different rules for entitlements.
For some employees you need to consider which earnings should be used in the Average Weekly Earnings (AWE) calculation before you can use the calculator.
Agency workers and casual (or short contract) employees
There are different rules for casual (or short contract) employees and agency workers.
You can treat agency workers as employees for PAYE tax and Class 1 National Insurance contributions (NICs). If you deduct PAYE tax and Class 1 NICs from the agency worker’s earnings, or would do if they were high enough, then you will have to pay them Statutory Adoption Pay (SAP) if they satisfy the qualifying conditions.
Casual and short contract employees
A casual employee is usually someone who works for an employer, as and when they are required on a series of short contracts of employment with that person. Such casual workers may also be called short contract employees. If you have to deduct PAYE tax and Class 1 NICs from the worker’s earnings, then you will have to pay them SAP if they satisfy all the qualifying conditions.
The Agricultural Wages Board in England was abolished on 1 October 2013.
From this date Agricultural workers in England who are not covered by the terms and conditions of the Agricultural Wages Board will be eligible for Statutory Payments if they meet the appropriate qualifying conditions.
Mariners can get SAP if you have a place of business in the UK and they are on a home-trade ship.
Some NHS employees whose contracts are split between Strategic Health Authorities and NHS Trusts, as a result of NHS reorganisation, can choose to have all their earnings added together for working out AWE for SAP purposes.
However, if an employee changes from one Trust to another during the 26 weeks qualifying period, the employee may not satisfy the continuous employment rule for SAP purposes.
For further advice email: email@example.com
Supply teachers, seasonal workers or other sporadic employments
Generally the same rules apply as for agency workers, but if they are either:
sick throughout the matching week
not required to work during those weeks
they are treated as having worked in the Matching week (MW). This applies even if they don’t resume work before commencing their adoption absence.
Companies incorporated after 1 October 2009
There are new regulations for companies incorporated after 1 October 2009. They provide new Articles of Association for these companies and will:
- apply by default if other Articles are not adopted
- allow its directors to determine a director’s remuneration
Directors can decide what remuneration to pay and when. There is no need for a resolution of the companies shareholders at its Annual General Meeting (AGM). In such cases payment of director’s fees will be regarded as earnings for the purpose of entitlement to SAP on the date payment was made and the SAP calculator used in the normal way.
Companies incorporated before 1 October 2009
The previous standard Articles, which apply in default, continue to apply. An ordinary resolution is required to determine director’s remuneration. The method of calculating director’s remuneration by an annual figure (after an ordinary resolution has been passed by shareholders) will apply to these companies. Any payments made in anticipation of the annual vote cannot be taken into account for calculating AWE.
If the director is contractually paid a regular salary their AWE are calculated like any other employee.
Paid by a determination of the directors (not a formal vote)
Calculate the AWE by adding together the monies paid and any other payments of earnings, but use the date monies were paid instead of the date of the shareholders’ resolution at the AGM to determine the total earnings during the relevant period.
Paid both contractually and by formal vote
A director who is paid contractually may also be paid a bonus or fees by a formal vote. You must still calculate their AWE like any other employee, but you should only include the monies voted by formal vote if the date of the vote falls in the relevant period.
Paid only by a formal vote
If the director is paid only by a formal vote calculate their AWE in the usual way, substituting the dates of the formal votes in place of the normal paydays. A formal vote usually takes place at the company’s AGM and is agreed in the company minutes.
Monies drawn in anticipation of a formal vote
Some directors may regularly draw money from the business in anticipation of a formal vote. Don’t include this money when working out the director’s AWE, even if NICs were deducted at the time they were paid.
Employee has more than 1 job with you
If you add together all the employee’s earnings to work out Class 1 NICs you must add them together to calculate the employee’s AWE, and the employee can only get 1 amount of SAP. In this case, they should take the same time off from each job, otherwise they will lose some of their SAP because they are working for you.
If you work out Class 1 NICs separately on the employee’s earnings, then you must work out their AWE separately, as the employee can get more than 1 lot of SAP.
Employee works abroad
If your employee works for you outside the UK during the qualifying period, they can get SAP if you were liable to pay Class 1 NICs on their earnings throughout that period, or would have been if their earnings had been high enough.
If you weren’t liable to pay Class 1 NICs throughout that period and they worked for you in the European Economic Area (EEA), they may still get SAP where both the following apply:
they work for you within the EEA during the qualifying period
they worked for you in the UK in the MW, and you were liable to pay Class 1 NICs on their earnings for that week, or would have been if their earnings had been high enough