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HMRC internal manual

Statutory Payments Manual

Average Weekly Earnings (AWE) - SMP/SAP/ShPP/SPP: part of wages paid as childcare/nursery vouchers

Employees may agree with their employers that part of their wages will be paid as nursery or childcare vouchers. This may be a simple contractual; informal arrangement or as part of a formal salary sacrifice scheme. How it is done effects the AWE calculation and for SMP it effects the amount of SMP payable.

Salary sacrifice

Under this scheme the employee sacrifices part of their salary and receives another benefit such as nursery vouchers in exchange. No NIC is payable on the vouchers. When calculating AWE only the net salary after the sacrifice should be taken into account.

SMP example

An employee’s salary is £350 per week but she enters into a salary sacrifice arrangement for £50 and gets childcare vouchers in return. She is therefore paid £300 per week salary plus £50 in vouchers, but only pays NICs on £300.

Her AWE is only £300 as she sacrificed the other £50. The SMP payable for the first 6 weeks of her MPP is, therefore, £300 x 90% which is £270 per week. This must be paid in money not money plus vouchers.