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HMRC internal manual

Statutory Payments Manual

Average Weekly Earnings (AWE) - SMP/SAP/ShPP/SPP: payments made on termination of employment

Not all payments made on termination of employment are classed as earnings for NICs. If the payment is not “earnings” it cannot be set off against liability to pay statutory payments.

Compensation payments and settlements by Employment Tribunal are not normally contractual and do not attract NIC liability so they are not earnings and cannot be treated as a payment of SMP.