The “Alabaster ruling” refers to the landmark case of Alabaster v Woolwich plc and Secretary of State for Social Security (2002). This
European Court of Justice case fundamentally changed how Statutory Maternity Pay (SMP) is calculated in the UK, ensuring fairer treatment for pregnant employees who receive pay increases.
The case that changed maternity pay
Michelle Alabaster was an employee at Woolwich Building Society who received a pay raise after the period used to calculate her statutory maternity pay (SMP) but before she went on maternity leave. Under the rules at that time, this pay increase wasn’t reflected in her maternity pay calculations.
Mrs. Alabaster challenged this, arguing that failing to include her recent pay rise in her SMP calculations constituted sex discrimination. The European Court of Justice ruled in her favour, establishing that pay increases awarded at any time between the start of the reference period and the end of maternity leave must be included in SMP calculations.
Key changes following the Alabaster Ruling
Before the Alabaster ruling, SMP was calculated solely based on average earnings during a set reference period (usually the 8 weeks or 2 months before the qualifying week). The ruling and subsequent legislation changed this to include:
Pay rises during the reference period
Any pay increases during the 8-week/2-month reference period must be factored into the average earnings calculation.
Pay rises after the reference period but before maternity leave
If you receive a pay increase after the reference period but before your maternity leave begins, your SMP must be recalculated to include this increase.
Pay rises during maternity leave
Even pay increases awarded while you’re on maternity leave must be taken into account, potentially increasing your SMP for the remainder of your leave.
How is SMP calculated post-Alabaster?
Following the Alabaster ruling, SMP is calculated as follows:
- First 6 weeks: 90% of your average weekly earnings, including any applicable pay rises
- Remaining 33 weeks: The lower of either £187.18 per week (2025/26 rate) or 90% of your recalculated average weekly earnings
The crucial difference is that the “average weekly earnings” must now be adjusted to reflect any pay increases that occur between the start of the reference period and the end of your maternity leave.
Practical example of the Alabaster effect
Scenario before Alabaster
- Sarah earns £400 per week during her reference period
- She receives a pay rise to £450 per week after the reference period
- Her SMP would be calculated based only on £400 per week
- First 6 weeks: £360 per week (90% of £400)
- Remaining 33 weeks: £187.18 per week (the statutory rate)
Scenario after Alabaster:
- With the same facts, Sarah’s SMP would be recalculated
- First 6 weeks: £405 per week (90% of £450)
- Remaining 33 weeks: £187.18 per week (the statutory rate)
Over the first 6 weeks alone, the Alabaster ruling would provide Sarah with an additional £270 in maternity pay.
Retrospective payments
The Alabaster ruling also established that employers must make adjustments to SMP if pay rises are awarded retrospectively. This means if the employee receives a backdated pay increase that applies to the reference period, SMP should be recalculated accordingly.
How to ensure SMP reflects the Alabaster Ruling
To ensure employees receive the correct SMP under the Alabaster ruling:
- Keep records: Document any pay increases awarded before, during or after the reference period
- Notify the payroll team: Inform the HR/Payroll team about any pay increases that the employee thinks should affect the SMP calculation
- Check the calculations: Employees can request a breakdown of how the SMP was calculated to verify the inclusion of any pay risesSeek advice: If the employee believes that the SMP hasn’t been calculated correctly, they should, as a starting point, contact the HR or payroll department.
Common questions about the Alabaster Ruling
Does the Alabaster ruling apply to all pay increases?
Yes, it applies to any contractual pay increases, including cost-of-living increases, performance-related pay rises, and incremental progression.
What if my pay increase is awarded after my maternity leave ends?
The Alabaster ruling only applies to pay increases awarded before or during maternity leave. Increases awarded after your leave ends won’t affect your SMP.
Does the Alabaster ruling apply to Maternity Allowance?
No, the ruling specifically affects SMP. Maternity Allowance follows different calculation rules.
What legislation implemented the Alabaster ruling?
The ruling was formally implemented in UK law through the Statutory Maternity Pay (General) Amendment Regulations 2005.
The Alabaster ruling represents a significant victory for maternity rights, ensuring that pregnant employees don’t miss out on the benefits of pay increases due to their maternity leave. While the calculations can be complex, employers and employees should have a clear understanding of the rules to ensure that the correct SMP is paid.
If an employee is planning maternity leave and has received or expects to receive a pay increase, the employer and payroll team should be aware of the Alabaster ruling and its implications for SMP calculations.
Need further help or information about payroll or the Alabaster ruling? Speak to the team at Ascend Payroll today!
