Salary sacrifice during maternity leave

Statutory Maternity Pay cannot be sacrificed: it must be paid in full and in cash. At the same time, every non pay contractual benefit, including benefits the employee normally pays for by salary sacrifice, must carry on throughout statutory maternity leave, so the employer usually ends up funding them while the employee’s pay drops to SMP. A sacrifice that was running during the SMP relevant period also reduces the average weekly earnings on which SMP is calculated.

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What must an employer keep providing during maternity leave?

Regulation 9 of the Maternity and Parental Leave etc. Regulations 1999 says that an employee on ordinary or additional maternity leave is entitled to the benefit of all the terms and conditions of employment that would have applied if she had not been absent, and is bound by her obligations under them. The only thing excluded is remuneration, and regulation 9(3) defines remuneration narrowly: only sums payable by way of wages or salary. That mirrors section 71 of the Employment Rights Act 1996.

HMRC’s guidance for employers on Statutory Maternity Pay applies this directly. It says all non pay contractual benefits must continue during statutory maternity leave, and gives childcare vouchers, a company car and a mobile phone provided under the contract as examples. Government guidance also confirms that rights such as pay rises, holiday accrual and the right to return are protected.

The effect for salary sacrifice is straightforward. Under a sacrifice the employee has agreed to a lower cash salary plus a benefit. The cash salary is remuneration and stops being payable during leave, replaced by SMP or any enhanced maternity pay. The benefit is a non pay term, so it continues, and there is no longer enough salary to sacrifice from.

Can SMP itself be sacrificed?

No. HMRC states that SMP must be paid in full, cannot be sacrificed or offset against other benefits and must be paid in cash. It also says that the value of childcare vouchers provided during the maternity pay period cannot be deducted from SMP. An employer that keeps running the payroll deduction for a sacrificed car or vouchers against SMP is underpaying SMP.

Where the employer pays enhanced contractual maternity pay above SMP, the contract decides whether a sacrifice can continue against the enhanced element. What it cannot do is reduce the statutory amount. For the basic SMP rules, see our guide to Statutory Maternity Pay.

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How does salary sacrifice change the amount of SMP?

SMP is worked out from average weekly earnings (AWE) in the relevant period before the qualifying week. HMRC says that where an employee has entered into a salary sacrifice, AWE is calculated using the earnings actually paid in that period, based on earnings subject to National Insurance. Sacrificed pay is not in that figure.

For 2026 to 2027, SMP is 90% of AWE for the first six weeks, then £194.32 or 90% of AWE if lower for the remaining 33 weeks, applying from 5 April 2026. If AWE falls below the lower earnings limit, which is £129 a week for 2026 to 2027, the employee cannot get SMP at all. HMRC’s salary sacrifice guidance warns that a sacrifice can also reduce or remove entitlement to earnings related benefits such as Maternity Allowance.

What does that look like in numbers?

Illustration only. An employee’s contractual salary is £700 a week. She sacrifices £70 a week for an employer pension contribution, so her cash pay and AWE are £630 a week.

	Without sacrifice	With sacrifice
AWE	£700	£630
SMP for weeks 1 to 6 (90% of AWE)	£630 a week	£567 a week
SMP for weeks 7 to 39	£194.32 a week	£194.32 a week

The sacrifice costs her £63 a week for six weeks, £378 in total, in SMP. The flat rate weeks are unaffected because 90% of AWE is above £194.32 in both cases. For a lower paid employee whose sacrifice took AWE close to £129, the loss could be the whole of SMP. One option, if the employee wants it, is to suspend the sacrifice before the relevant period by a proper contract variation.

What happens to pension contributions made by salary sacrifice?

A sacrificed pension contribution is legally an employer contribution (EIM42780). That brings two sets of rules into play.

First, section 75 of the Equality Act 2010 implies a maternity equality rule into every occupational pension scheme. Terms about membership, accrual of rights and the amount of benefit must treat time on maternity leave as if the employee were not on leave. Section 75(7) allows the employee’s own contributions to be based on what she is actually paid, and section 75(10) confirms that being paid by the employer includes receiving SMP. Section 75(9) means accrual during unpaid additional maternity leave is not required.

Second, regulation 9 keeps contractual terms other than wages or salary running. An employer pension contribution is not wages or salary, so a contract promising one is a term that continues. Regulation 9(4) caps what this requires for unpaid additional maternity leave at the Social Security Act 1989 standard.

The cautious course is to continue the full contribution, including the sacrificed element, through the paid part of leave. Because scheme rules differ between occupational schemes and group personal pensions, HMRC’s guidance advises employers to check any arrangement with their scheme provider. The Pensions Regulator also treats SMP as part of qualifying earnings for automatic enrolment, so contributions on SMP are still due under the employer duties.

Can the employee stop or change the sacrifice?

HMRC accepts that a salary sacrifice can allow the employee to opt in or out when there is a lifestyle change that significantly alters their finances, and gives examples including marriage, divorce and a partner becoming pregnant. Each change must be made by altering the contract so it is clear what cash and benefits the employee is entitled to at any time. What HMRC will not accept is switching between cash and the benefit whenever the employee likes; where that happens the expected tax and National Insurance advantages may not apply (EIM42767 explains the 12 month approach).

Ending a car or cycle arrangement early may also trigger costs under the lease or hire agreement, which is a contractual question rather than a tax one. For childcare benefits, see employer supported childcare.

What mistakes do employers make?

Deducting the cost of a sacrificed benefit from SMP, or withdrawing the benefit because pay has dropped.
Calculating AWE on the pre sacrifice salary instead of earnings actually paid in the relevant period.
Stopping employer pension contributions at the start of leave without checking the scheme rules and the Equality Act position.
Varying the sacrifice informally, with no change to the contract, so the employee’s entitlement is unclear.
Forgetting that SMP can still be recovered: 92% for most employers and 109% where Class 1 National Insurance in the previous tax year was £45,000 or less. See recovering statutory payments.

For how salary sacrifice works more generally, see salary sacrifice schemes, and for one off sacrifices see sacrificing a bonus into a pension.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.