What was the case about? 

Michelle Alabaster, an employee of the then Woolwich Building Society, went on maternity leave in January 1996. She later started legal proceedings against her employer on the grounds that her maternity pay did not reflect a pay rise she had received effective from 1 December 1995, in breach of European Law and the Equal Pay Act.  

The case worked its way up to the European Court of Justice and, despite having complied with SMP regulations at the time, Woolwich (by then part of Barclays Bank) eventually lost the case in 2004 on the grounds that the SMP regulations did not correctly implement European Union law. Barclays were obliged to pay additional SMP to Mrs Alabaster, the UK SMP rules were amended in 2005 to reflect the ruling, and those changes are still relevant today. 

What it means 

The Alabaster ruling means an employee’s SMP entitlement can be affected by pay rises actually awarded during maternity leave (or which would have been awarded had the employee not been on maternity leave) and any rise during the period before maternity leave started, on which the calculation of the SMP payment is based.

The ruling therefore covers pay rises effective from any time between the start of the relevant period and the end of the employee’s statutory maternity leave. The relevant period is the eight-week period immediately preceding the qualifying week. The qualifying week begins 15 weeks before the week in which the baby is due.

Given statutory maternity leave can last up to 52 weeks, this means pay rises arising at any point over a 17-month period leading up to the end of the employee’s maternity leave can affect SMP entitlement, and oblige the employer to make ‘top up’ payments of SMP whilst the employee is on maternity leave.

If the employee is already on maternity leave when a pay rise is awarded, the Alabaster ruling means they will be entitled to a ‘top up’ payment to cover the additional SMP due. The employer will need to recalculate the SMP entitlement as if the pay rise had been in place during the eight-week relevant period.  

Whilst payroll software has progressed since the ruling and should take account of its implications, it is worth remembering the key takeaway from the case, and making sure that pay rises are correctly reflected during maternity leave. 

Further guidance on how to calculate SMP and the impact of pay rises is available on GOV.UK. 

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.     

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