MAJI is a very neat piece of software which combines low financial input and maximum output in terms of value given to the employee. I rarely become excited about an app but this one is really clever.
It is an app which makes sense of pensions, and it includes a personal video relating to the company pension scheme. (It does not relate to personal pension schemes). It will provide a suite of pension services for a low cost per employee. It is also linked to NEST and gives immediate access through a dashboard to a number of excellent benefits. It shows:
Most people are saving roughly 8% of their earnings into pension, and could do with doubling that. This is very hard to do without education and raising awareness, which this app succeeds in doing. Because it’s an app it’s very user friendly and easy to use and to keep integrated examples at hand, whilst also educating individuals in a painless way. It provides financial coaching and chosen third parties can be attached to the app instead of the ones automatically included, if the employer so wishes. There are master classes on wider issues, such as dealing with money in relation to children and also budgeting.
The app has been very well developed and also includes the psychology of the way in which people make choices, based on the Nobel prize-winning work of Richard Thaler on behavioural economics.
It is perfect for an organisation that is not big enough to have its own big-employer portal on benefits. Various individuals and companies have expressed an interest in this and questions have come to light which I have answered below by describing some of the detail. It is also a useful vehicle for refreshing peoples minds on employment law issues in relation to family friendly legislation, such as parental leave, and will give the opportunity for HR departments to look forensically at their policies and procedures in handbooks and on their portals, where applicable.
For example, the following questions have emerged:
Q. If an employee is on any kind of parental (maternity or paternity) leave, would they still receive an increment in salary and benefits?
A. In this scenario, an employer is required to treat absent employees as above, in just the same way as if they were present at work. Any pay rises and improvements or changes in terms of conditions will be equally applicable to those not present and we can generally include that salary sacrifice is part of the terms and conditions of employment. Therefore those on parental leave, for example, maternity and paternity leave, should receive the same benefits while they are off, rather than waiting for their return.
Q. Is the amount of statutory parental leave calculated on the original salary or the post sacrifice salary, if somebody has opted for salary sacrifice, and is this decided by the employer or by the state?
A. SMP is payable at
SPP is payable at the statutory weekly rate of £151.97, or 90% of their average weekly earnings (whichever is lower). There are statutory rules about how to calculate AWE. If an employee has entered into a salary sacrifice with their employer, then their AWE is calculated using the amount of earnings actually paid to them after the sacrifice during the relevant period.
Q. If a staff member has opted for salary sacrifice and then goes on parental leave, would the employer have to continue to pay the pension contributions even though the member were receiving statutory parental pay? If so, how are these calculated?
A. Yes. The employee and the employer will continue to make pension contributions during paid Maternity Leave (OML to week 26 and AML weeks 27 to 39) and paid Paternity Leave. The amount the employee contributes is based on actual pay during the time on parental leave. HMRC have rules in place which determine how much SMP/SPP/SAP an employee should receive whilst on parenting leave, based on the earnings of the employee during a set period leading up to the start of their leave. The amount the employer pays is based on the pensionable earnings that they would have received if they were not on parental leave. If the employee is not paid during maternity leave, the employer still has to make pension contributions in the first 26 weeks of maternity leave (‘Ordinary Maternity Leave’).
The employer must continue to make pension contributions after the statutory period only if it is in the contract of employment.
The employer may be required to cease the employee’s participation in a salary sacrifice arrangement during maternity or paternity leave to comply with their duty to pay a salary at least at the National Minimum Wage.
Q. Is it usually in the interests of the employee to opt out of salary sacrifice before going on parental leave?
A. Calculations will vary according to individual cases, so it is important not to generalise. In order to qualify for SMP or SPP, an employee needs to have average weekly earnings of at least £120 pw (2021/22) in the 8 weeks/ 2 months before the 15th week that the baby is due.
In cases where salary sacrifice is making the AWE dip below this level, it would be advantageous to the employee to opt out of salary sacrifice before the start of the period for which AWE is calculated. If the employee does not opt out, the employee will not be entitled to any SMP/ SPP in these circumstances. Where the salary sacrifice does not bring the employee below the AWE threshold, the situation is more complex.
For SMP, paid at 90% of the AWE for the first 6 weeks, the AWE will be reduced by salary sacrifice. Therefore it could be in the employee’s interest to opt out of salary sacrifice during the qualifying period to maximise AWE. However, the salary sacrifice arrangements will have financial benefits which may be greater than the benefits of the increase in AWE without salary sacrifice, so individual circumstances must always be considered.
For Maternity Leave after the first six weeks, and Paternity Leave from the outset, the SPP/SMP is the lower of:
If statutory rate of SMP/SPP is lower than 90% of AWE, then the AWE is not relevant, so there would be no advantage in opting out of salary sacrifice during the qualifying period.