SPP: Special Circumstances and Business Changes

Introduction

Statutory Paternity Pay (SPP) entitlement can be affected by various employment situations and business changes. This article explains what happens to SPP when circumstances change, including business transfers, employee redundancy, special birth situations, and different employment arrangements. Understanding these rules will help you pay SPP correctly even when unexpected situations arise.

Business Transfers and TUPE

When you take over a business, continuity of employment usually continues if the Transfer of Undertakings (Protection of Employment) Regulations (TUPE Regulations) 2006 apply. These regulations apply when you take over a business, part of a business, or a service provision together with the employment contracts of the transferred employees.

If continuity of employment is not broken, your employee can get SPP as long as they worked for you and the previous employer during the 26 weeks up to and including the qualifying week or matching week.

Continuity of employment may also remain unbroken in specific situations even if TUPE does not apply:

• A teacher moves between schools maintained by the same local education authority
• One corporate body takes over from another as employer under an Act of Parliament
• The employer dies and their personal representative or trustees keep the employee on
• There is a change in partners, personal representatives, or trustees
• The employee moves between two associated employers

If continuity of employment is broken and you take on a business after the birth of the baby or after the child is placed, the previous employer must pay SPP. If you take on the business before the birth or placement, your employee cannot get SPP.

When Your Business Ceases or Becomes Insolvent

If you cease trading, you remain liable to pay any outstanding SPP until either your employee has received their full entitlement or their entitlement ends for another reason.

If you become insolvent during the SPP period, HMRC will pay your employee's SPP from the date of insolvency. You should advise your employee to contact HMRC's Statutory Payment Dispute Team. You, the administrator, liquidator, or similar must tell HMRC so employees are paid as soon as possible.

Redundancy and SPP

If you make your employee redundant, you remain liable to continue paying SPP provided all the qualifying conditions have been met.

Pay Changes and Recalculations

Backdated Pay Rises

If your employee receives a backdated pay rise which increases earnings already paid in the relevant period, you must recalculate their average weekly earnings and pay any extra SPP due. If the employee was not previously entitled to SPP, you must recalculate to check if they may now qualify.

Salary Sacrifice

If an employee has entered into a salary sacrifice arrangement, their average weekly earnings are calculated using the amount actually paid during the relevant period. SPP cannot be sacrificed and must be paid in full.

PAYE Settlement Agreements

You must recalculate your employee's average weekly earnings if their average weekly earnings are less than the Lower Earnings Limit and they received expense payments or benefits in kind included in a PAYE Settlement Agreement during the relevant period.

Special Birth and Placement Circumstances

Premature or Early Birth

If the baby is born early, special rules apply for evidence and payment timing. Your employee must tell you the date of birth as soon as possible and confirm when they want to take paternity leave and SPP. They can choose to take leave any time between the actual date of birth and the end of an 8-week period running from the Sunday of the week the baby was originally due.

If the baby was born before the employee was due to give you their completed form SC3, they should complete it as soon as possible, confirming both the due date and actual birth date. You do not need a birth certificate or evidence of pregnancy.

The SPP period always starts the day after the last day your employee worked before starting paternity leave.

Stillbirth

Your employee is entitled to SPP if the baby is stillborn from the 24th week of pregnancy. The rules are the same as for a live birth.

Child Dies

Employees still qualify for Paternity Pay and leave if the baby is either stillborn from 24 weeks of pregnancy or born alive at any point in the pregnancy but later dies. Employees can take any paternity leave booked prior to the death. Any leave not already booked can be booked and taken within 8 weeks of the child's death. Parents may also be eligible for Parental Bereavement Leave and Pay.

Adoption: Child Not Placed or Placed Later

You cannot pay SPP until the child is placed. Your employee must tell you when placement happens. Do not start paying on the assumption the child was placed on the expected date.

Adoption: Child Stops Living with the Adopter

If the child stops living with the adopter or is returned during the first year following placement, employees can have any Paternity Pay or leave booked prior to this happening. Any leave not already booked must be booked and taken within 8 weeks of the child no longer living with the adopter.

More Than One Child Placed

There is no entitlement to two separate periods of SPP and paternity leave if more than one child is placed under the same arrangement. However, if each child has been placed under separate adoption arrangements (indicated by separate matching certificates), there is entitlement to a further two weeks of SPP and paternity leave from the date the second child is placed.

When Employment Ends

Employee Leaves Before Paternity Leave

If your employee has left their job, they cannot get paternity leave. For SPP:

• If they left before the baby was born, they are not entitled to SPP
• If they left after the baby was born, they may be entitled to SPP

If your employee left after the birth, it does not matter why they left or that they're not returning—they're entitled to SPP as long as they do not start work for a new employer during the SPP period.

If employment ends after the baby has been born but before the planned start of the SPP period, you may treat the SPP period as beginning on the day after the last day of employment. Your employee can choose when to begin their SPP period between the actual date of birth and the end of an 8-week period running from either the day after the baby is born or the day after the Sunday of the week the baby was originally due.

For adoption, if your employee leaves before the child is placed, they cannot get SPP or paternity leave. If they leave after the child is placed but before the planned start of the SPP period, you may treat the SPP period as beginning on the day after the last day of employment.

Employee Dies

If your employee dies during the SPP period, you should pay SPP for the week in which they die, but not for any week in the pay period after that.

Reinstatement Situations

If you dismissed your employee and they are reinstated after an employment tribunal decides you dismissed them unfairly, or you reinstate them following a statutory grievance procedure, they may be entitled to paternity leave provided all other conditions are satisfied.

If your employee served in the armed forces and returns to work within 6 months of the end of their service, they may still be able to get SPP under the Reserve Forces (Safeguard of Employment) Regulations. They must have been continuously employed by you for 26 weeks up to and including the qualifying week or matching week and continued to work for you until the baby was born or the child was placed. Do not count the period they served in the armed forces as part of this period.

Different Employment Types

Agency Workers and Casual Employees

If you deduct PAYE tax and Class 1 National Insurance contributions from agency workers' earnings (or would do if they were high enough), you must pay them SPP if they satisfy the qualifying conditions. They can still get SPP if you did not have work to offer them or if you offered work but the employee was unavailable because of sickness, injury, maternity leave, paternity leave, adoption leave, parental leave, or paid holiday.

Casual employees who work on a series of short contracts follow the same rules. If you deduct PAYE tax and Class 1 National Insurance contributions from their earnings, you must pay them SPP if they satisfy all qualifying conditions.

Supply Teachers and Seasonal Workers

The same rules apply as for agency workers, but if they are sick throughout the matching week (adoption) or qualifying week (birth) or not required to work during those weeks, they can be treated as having worked in that week. This applies even if they do not resume work before commencing paternity absence.

Mariners

Mariners can get SPP if you have a place of business in the UK and they are on a home-trade ship.

Employees Working Abroad

Where your employee works for you outside the UK from the latest start date for employment up to and including the Sunday of the qualifying week or matching week and continues to work until the baby is born or child is placed, they can get SPP if you are liable to pay Class 1 National Insurance contributions on their earnings throughout this period (or would have been liable if their earnings were high enough).

If you are not liable to pay Class 1 National Insurance contributions, your employee may still get SPP if they work within the European Economic Area (EEA) and you were liable to pay Class 1 National Insurance contributions on their earnings during the qualifying week or matching week. For SPP, your employee must continue working for you until the end of the week before they want their SPP to start.

Directors

For companies incorporated after 1 October 2009, directors can determine remuneration without a shareholder resolution. Payment of director's fees is regarded as earnings for SPP purposes on the date payment was made.

For companies incorporated before 1 October 2009, an ordinary resolution is still required to determine director's remuneration. Payments made in anticipation of the annual vote cannot be taken into account for calculating Average Weekly Earnings (AWE).

The calculation method depends on how the director is paid:

• Paid contractually: Calculate AWE like any other employee
• Paid by directors' determination: Use the date monies were actually paid
• Paid both contractually and by formal vote: Calculate like any other employee but only include voted monies if the vote date falls in the relevant period
• Paid only by formal vote: Calculate using the dates of formal votes instead of normal paydays
• Monies drawn in anticipation: Do not include these when working out AWE, even if National Insurance contributions were deducted

Multiple Jobs

If your employee has more than one job with you:

• If you add all earnings together to work out Class 1 National Insurance contributions, do the same for AWE and the employee can only get one lot of SPP (they should take the same time off from each job)
• If you work out Class 1 National Insurance contributions separately, work out AWE separately and the employee can get more than one lot of SPP (they can choose different time off from each job)

If your employee has more than one employer, they can get SPP from each employer if they satisfy all qualifying conditions with each. They can choose to take different time off from each employer.

Agricultural Workers

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 are eligible for Statutory Payments if they meet the appropriate qualifying conditions.

Foster Carers

SPP may be available to foster carers who go on to adopt a child only if they satisfy the qualifying conditions.

Sources

• Statutory Paternity Pay: business changes that affect payment
• Statutory Paternity Pay: employee circumstances that affect payment
• Statutory Paternity Pay: how different employment types affect what you pay

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.