5 common statutory pay mistakes – and how to avoid them

Getting statutory pay right is essential for UK employers. From statutory sick pay (SSP) to statutory maternity pay (SMP), even small errors can cause problems with HMRC or lead to disputes with employees.

In this article, you’ll learn the most common statutory pay mistakes and their legal and financial consequences. You’ll also gain some practical strategies for avoiding these errors and making statutory pay less of an administrative burden.

Disclaimer: Everything in this article is correct as of September 2025. UK statutory pay rules can change frequently – always double-check the latest government guidance before making decisions.

Avoiding errors in statutory pay: what to watch out for

Statutory pay is the minimum amount of paid leave employers are legally required to give most employees in various situations.

The rules can be surprisingly complex, with multiple eligibility criteria, varying pay rates and different documentation requirements. As a result, even experienced HR and payroll teams can slip up when juggling multiple types of statutory pay alongside normal pay and other pay types (e.g. overtime, redundancy pay, etc.).

The most common statutory pay errors tend to occur in the following areas:

• Holiday pay

• Statutory sick pay

• Maternity pay

• Paternity pay

• Shared parental pay

Let’s take a look at these types of statutory pay mistakes in closer detail.

1. Holiday pay mistakes

Holiday pay is the statutory entitlement that ensures employees are paid for annual leave. In the UK, almost all workers are legally entitled to 5.6 weeks of paid holiday each year. This includes agency workers and those working irregular hours.

Employers must calculate holiday pay for their eligible employees based on their average weekly rate of pay. Factors like overtime and non-working days should also be taken into account where relevant.

Common holiday pay errors

• Miscalculating holiday pay for workers with irregular hours or variable pay

• Failing to include overtime, commission or allowances in holiday pay calculations

• Carrying over unused holiday incorrectly, especially after sick leave or maternity leave

• Treating zero-hours or part-time staff unfairly in comparison to full-time staff

Consequences of holiday pay mistakes

Failing to pay employees the correct holiday pay can damage trust and harm the company’s reputation. These errors can result in unlawful deduction of wages claims, backdated pay liabilities and tribunal cases.

How to avoid these mistakes

• Use the government’s holiday calculator to calculate leave entitlement

• Keep up-to-date records of hours worked, including overtime

• Automate holiday pay calculations in payroll software for staff with variable earnings

• Review policies on holiday carryover to ensure they align with UK regulations

2. Statutory sick pay mistakes

Statutory sick pay (SSP) is the minimum financial support employers must provide to eligible employees who are off work due to illness for up to 28 weeks.

To be eligible for SSP, employees must earn the lower earnings limit of £125 per week. They must also provide appropriate evidence of sickness, such as a fit note.

Statutory Sick Pay is not payable for the first three qualifying days (also known as ‘waiting days’) in a ‘Period of Incapacity for Work’ (PIW).

Note: If an employee who can’t work through illness doesn’t qualify for SSP, the organisation must complete an employer form SSP1. The employee can use the completed form to apply for a government benefit like the Employment and Support Allowance (ESA) or Universal Credit.

Common SSP errors

• Failing to check SSP eligibility, such as the three-day waiting period and minimum earnings thresholds

• Miscalculating qualifying days during a period of sickness

• Stopping SSP too early during a period of long sick leave

Consequences of SSP mistakes

If SSP is calculated incorrectly or paid late, employees may bring employment tribunal claims for unlawful deduction of wages.

HMRC can also issue fines for incorrect PAYE reporting, while reputational damage may affect recruitment and retention.

How to avoid these mistakes

• Calculate statutory sick pay using the SSP calculator on gov.uk

• Keep accurate sickness absence and payroll records

• Automate SSP triggers in payroll software to reduce human error

3. Statutory maternity pay mistakes

Statutory maternity pay (SMP) is paid to eligible employees taking maternity leave for up to 39 weeks.

To be eligible for statutory maternity pay, employees must earn the lower earnings limit of £125 per week. They must also have worked for their organisation continuously for at least 26 weeks.

Common SMP errors

• Miscalculating the qualifying period or average weekly earnings

• Failing to provide employees with written notice of SMP entitlement

• Paying SMP late or failing to process it correctly through PAYE

Consequences of SMP mistakes

Mistakes relating to SMP can lead to tribunal claims, HMRC penalties and formal grievances. Handling maternity rights poorly also risks damaging trust with employees at a critical point in their working life.

How to avoid these mistakes

• Double-check eligibility criteria and calculations using gov.uk guidance

• Train HR staff on SMP notice requirements

• Automate SMP calculations within payroll systems

Note: Statutory maternity pay is not the same as the Maternity Allowance, which is a payment individuals can receive from the government in certain circumstances. These include being employed but not qualifying for SMP and being self-employed.

4. Statutory paternity pay mistakes

Statutory paternity pay is paid to eligible employees who take paternity leave. It is usually paid for one or two consecutive weeks at either the statutory rate set by HMRC or 90% of average weekly earnings, whichever is lower.

Common statutory paternity pay errors

• Confusing statutory paternity pay with shared parental pay entitlements

• Missing deadlines for employee notice submissions

• Incorrectly applying average weekly earnings thresholds

Consequences of statutory paternity pay mistakes

Employers may face discrimination claims or disputes that escalate into tribunal action. Incorrect processing also exposes the business to payroll compliance fines.

How to avoid these mistakes

• Provide clear onboarding guidance to expectant fathers and partners

• Track leave and pay periods centrally to avoid missed deadlines

• Use payroll software to validate earnings thresholds automatically

5. Shared parental pay mistakes

Shared parental pay is paid to eligible employees taking shared parental leave following the birth or adoption of a child. It gives families more flexibility but requires employers to manage complex leave patterns and eligibility checks.

Common shared parental pay errors

• Incorrectly splitting leave between partners

• Paying shared parental pay when eligibility has not been met

• Overpaying due to incomplete or inaccurate record-keeping

Consequences of shared parental pay mistakes

Ineligible payments may need to be recovered, which can create conflict with employees. Employers may also face HMRC scrutiny for compliance failures.

How to avoid these mistakes

• Request complete documentation from both parents before confirming entitlement

• Use flowcharts or checklists to track complex leave patterns

• Cross-check shared parental pay against gov.uk guidance before processing

Practical steps to prevent statutory pay mistakes

By combining compliance knowledge with the right processes and tools, employers can significantly reduce the risk of statutory pay errors.

Here are some practical strategies for processing statutory pay accurately and in line with the law.

Keep policies and contracts updated with the latest rules

Statutory pay rules change regularly, from lower earnings thresholds to qualifying periods and eligibility criteria.

To avoid errors arising from outdated internal guidance, employers should monitor gov.uk and follow Budget announcements for the latest updates. Internal policies, payroll processes and employment contracts should all be kept up to date to reflect the latest statutory pay legislation.

Train HR and payroll staff

Eligibility rules, average weekly earnings and PAYE reporting requirements can be complex. Providing regular training for HR and payroll teams ensures staff understand how to apply these rules in practice. Well-trained teams are less likely to miscalculate pay or miss critical deadlines.

Training ensures everyone involved in the payroll process knows how statutory pay links to employment rights and the organisation’s wider compliance obligations.

Automate statutory pay calculations

Calculating statutory pay manually can increase the likelihood of mistakes, particularly when dealing with variable hours or complex eligibility criteria. Automating statutory pay calculations greatly reduces these risks.

With Rippling Payroll, UK employers can automate PAYE submissions, calculate statutory pay correctly and stay compliant with HMRC. This automation reduces legal exposure, saves time and provides employers with peace of mind that the organisation is following the rules and paying staff fairly.

Conduct regular payroll audits

Internal reviews of payroll records help identify underpayments or overpayments before they become disputes. Audits should include checking eligibility records, verifying average weekly earnings calculations and ensuring all statutory payments are processed through PAYE.

Improve communication with employees

Clear communication reduces the likelihood of disputes escalating. Employers should provide written confirmation of statutory pay entitlements during onboarding and whenever employees request leave. Transparency builds trust and reassures staff that their pay is being handled correctly.

How Rippling helps UK employers avoid statutory pay mistakes

If you’re looking for payroll software that truly does it all – automatically, accurately and globally – Rippling is the clear choice.

With Rippling Payroll, you get:

• Automated compliance: Calculate statutory pay correctly, automate PAYE submissions and stay compliant with HMRC at all times.

• Global consistency: Pay employees in their local currencies – both at home and abroad – while staying compliant with local tax requirements.

• Full configurability: Customise who can view, create and approve pay runs, run off-cycle pay runs at no extra cost and create new pay types like tips and bonuses.

• A unified system: When an employee moves, changes roles or updates benefits, every connected system updates automatically across payroll, time tracking, performance management and more

Rippling combines a comprehensive payroll solution with advanced HR management software to create a single, integrated system that scales with your business

Schedule a demo with Rippling today

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FAQs on statutory pay mistakes

Can HMRC fine employers for statutory pay errors?

Yes. HMRC can issue fines for incorrect PAYE reporting, late submissions and non-compliance with statutory pay obligations. Financial penalties can increase if errors are repeated or left uncorrected.

Does statutory pay have to go through PAYE?

Yes. Statutory payments such as SSP, SMP, statutory paternity pay and shared parental pay must all be processed through PAYE. Employers are responsible for deducting income tax and National Insurance contributions correctly.

What records should employers keep for statutory pay compliance?

Employers should keep detailed records of statutory pay, including eligibility checks, earnings calculations, leave dates, payment amounts and notices submitted by employees. Records must usually be kept for at least three years and should be available for HMRC inspection.

This blog is based on information available to Rippling as of September 16, 2025.