Salary sacrifice and Statutory Maternity Pay

Edited by Oliver Wakefield-Smith, Founder of Digital Signet. Last reviewed 23 June 2026.

Direct answer

Does salary sacrifice reduce my SMP?

Yes. The sacrificed amount no longer counts as gross pay, so your AWE in the 8 weeks before the qualifying week is lower, and your 90% phase is lower in proportion. The flat-rate phase is unaffected unless 90% of your reduced AWE falls below 194.32. Many employers suspend non-pension sacrifice during the AWE period to protect employees, and HMRC explicitly allows this.

How sacrifice affects AWE

Salary sacrifice converts taxable cash pay into a non-cash benefit (pension, EV, cycle, childcare voucher legacy). The reduced cash element is what passes through PAYE, and is what AWE is based on. A 200 per month childcare voucher sacrifice reduces annual cash pay by 2,400, which reduces AWE by 46.15 per week.

Pension sacrifice

Pension salary sacrifice continues during SMP. Your employer typically pays the agreed employer contribution based on pre-sacrifice salary throughout paid leave, even though your AWE was reduced for SMP calculation. Net effect is that your pension is broadly protected.

Cycle to work, EV, electric scheme

Cycle to Work agreements are typically suspended during unpaid weeks 40 to 52 if SMP cannot cover the deduction. EV salary sacrifice schemes vary by provider; check whether the employer continues the lease and recovers on return. Childcare voucher legacy schemes (Tax-Free Childcare replaced new entrants in October 2018, but legacy users continue) typically remain in place because the voucher value is delivered as a non-cash benefit.

HMRC position

HMRC EIM42755 confirms that an employer may end or suspend a salary sacrifice arrangement during maternity leave to protect SMP entitlement. The change must be properly varied as a contractual variation, not a unilateral payroll override.