Statutory Neonatal Care Pay

Introduction

Statutory Neonatal Care Pay is a new payment available to employed parents whose babies require neonatal care. If you're an employer, you need to understand when you must pay this benefit to eligible employees, how to calculate it, and how it works for different types of workers. This guide explains the eligibility criteria, payment calculations, and special rules that apply to different employment situations.

What is Statutory Neonatal Care Pay?

Statutory Neonatal Care Pay is money you must pay to employees who are parents of babies receiving neonatal care. Employees can choose when and how to take this payment alongside Neonatal Care Leave, which gives them time off work whilst their baby is in hospital receiving specialist care.

The payment is calculated based on the employee's average weekly earnings during a specific period before they claim.

Who is eligible for Statutory Neonatal Care Pay?

You must pay Statutory Neonatal Care Pay to any employee who meets the eligibility criteria, provided:

• You deduct PAYE (Pay As You Earn income tax) and Class 1 National Insurance contributions from their earnings
• Or you would deduct these if their earnings were high enough or they were old enough to pay them

The employee's average weekly earnings during the relevant period must not be less than the lower earnings limit for Class 1 National Insurance contributions. You can find the current lower earnings limit in HMRC's rates and allowances for the tax year.

Information you need to calculate the payment

Before calculating Statutory Neonatal Care Pay, you need:

• A completed declaration from your employee
• The baby's date of birth (or each baby's date of birth for multiple births)
• The date the baby started receiving neonatal care
• The date the baby stopped receiving neonatal care (if applicable)
• The date your employee wants to start their Statutory Neonatal Care Pay
• How many weeks of pay they want to claim
• Their gross earnings and the dates you paid them
• The date they started working for you

Calculating average weekly earnings

Average weekly earnings determine whether your employee qualifies and how much you should pay them. You must include all gross earnings on which Class 1 National Insurance contributions are due or would be due if the employee earned enough.

The relevant period

The relevant period is usually the 8-week period before the relevant week. It:

• Starts the day after the employee's last normal payday, falling at least 8 weeks before the end of the relevant period
• Ends on their last normal payday, on or before the first day of the relevant week (the Saturday of the relevant week)

If your employee already receives Maternity or Paternity Pay, the relevant week is the 15th week before the baby is due. For Statutory Adoption Pay, it's the week they were told they'd been matched with the baby for adoption.

Calculation methods for different pay patterns

Monthly-paid employees:

1. Add up all gross earnings in the relevant period

2. Divide by the number of calendar months in the relevant period

3. Multiply by 12

4. Divide by 52

Employees not paid monthly:

1. Add up all gross earnings in the relevant period

2. Divide by the number of days in the relevant period

3. Multiply by 7

Paid weekly without full weeks (for example, when paydays are brought forward for bank holidays):

1. Add up all gross earnings

2. Divide by the number of weeks they were actually paid, not the number of weeks in the relevant period

Paid in multiples of a week:

1. Add up all gross earnings in the relevant period

2. Divide by the number of whole weeks in the relevant period

No regular pay pattern:

1. Add up all gross earnings in the relevant period

2. Divide by the number of days in the relevant period

3. Multiply by 7

Special considerations

Salary sacrifice: Use the amount of earnings actually paid to your employee during the relevant period. Do not include the value of the salary sacrifice.

Backdated pay rises: If your employee receives a backdated pay rise that increases earnings already paid in the relevant period, recalculate their average weekly earnings. This applies if they were either not eligible for Statutory Neonatal Care Pay or entitled to less than the standard rate.

Overpayments or underpayments: Only use the gross earnings actually paid within the relevant period. If there's an over or underpayment of earnings, include the amount in the calculation.

Contractual benefits: Base your calculation only on earnings subject to Class 1 National Insurance contributions. Do not include benefits exempt from Class 1 National Insurance contributions.

How payment works

Once you've calculated average weekly earnings, you can work out how much Statutory Neonatal Care Pay is due and when to pay it.

The Statutory Neonatal Care Pay period starts on the date your employee has given notice for and lasts for every week they receive the payment.

You can pay Statutory Neonatal Care Pay in part weeks to align payments with your employee's normal pay period. To do this:

1. Divide the weekly Statutory Neonatal Care Pay rate by 7

2. Multiply by the number of days for which payment is due in that week or month

Special employment situations

Agency workers, casual and short-term contract employees

You must pay Statutory Neonatal Care Pay if you deduct PAYE and Class 1 National Insurance contributions from their earnings (or would do if earnings were high enough) and they meet the eligibility criteria.

They can still receive payment if:

• You have no work to give them
• You have work but they're not available
• They're sick or injured
• They cannot work due to parental leave, paid holiday, or statutory family leave

Directors

How you calculate Statutory Neonatal Care Pay for directors depends on when your company was incorporated and how the director is paid.

Companies incorporated before 1 October 2009: Use the annual figure to work out entitlement. Payments made before the annual vote cannot be taken into account.

Companies incorporated after 1 October 2009: Director's fees are classed as earnings on the date they were paid.

Paid contractually: Work out average weekly earnings like any other employee.

Paid by determination of the directors (not a formal vote): Add together the monies paid and any other gross earnings. Use the date the monies were paid, not the date of any shareholders' resolution.

Paid both contractually and by formal vote: Calculate average weekly earnings like any other employee. If the formal vote falls in the relevant week, include the bonus or fees.

Paid by formal vote only: Work out average weekly earnings in the usual way but use the date of the formal vote instead of their normal payday. A formal vote usually takes place at the annual general meeting.

Money drawn before a formal vote: Do not include this money when calculating average weekly earnings, even if Class 1 National Insurance contributions were deducted.

Employees working abroad

Your employee may receive Statutory Neonatal Care Pay if they work for you outside the UK, provided:

• You're liable to deduct Class 1 National Insurance contributions from their earnings (or would be if earnings were high enough)
• They meet the eligibility criteria

Supply teachers, seasonal workers and irregular employment

The same rules as agency workers apply. They can be treated as having worked in the relevant week even if you have no work, they're sick or injured, or they cannot work due to parental leave, paid holiday, or statutory family leave.

Mariners

If your place of business is in the UK and the mariner works on board a home-trade ship, they may receive Statutory Neonatal Care Pay if they meet the eligibility criteria.

Employees with more than one job with you

Your employee may receive either one lot of Statutory Neonatal Care Pay covering all jobs, or separate lots covering each job.

One lot: If you add all your employee's gross earnings together to work out Class 1 National Insurance contributions, do the same for average weekly earnings. They can only get one lot of payment. If they don't take the same time off from each job, they'll lose some entitlement.

Separate lots: If you don't add gross earnings together for National Insurance purposes, work out average weekly earnings separately. They can get separate lots of payment and won't lose any entitlement if leave is taken at separate times.

Employees with more than one employer

If your employee works for another employer and meets the eligibility criteria with both employers, they can receive more than one lot of Statutory Neonatal Care Pay, one from each employer.

Agricultural workers

Agricultural workers in England employed before 1 October 2013 are covered by the Agricultural Wages (England and Wales) Order 2012.

You must pay agricultural workers Statutory Neonatal Care Pay if:

• They were employed on or after 1 October 2023
• They meet the eligibility criteria

Sources

• How different employment types affect Statutory Neonatal Care Pay
• Manually calculate Statutory Neonatal Care Pay

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