NIM37100 - Refunds: refund of NICs paid on contractual maternity pay

Social Security (Refunds) (Repayment of Contractual Maternity Pay) Regulations 1990 (SI 1990 No 536)

Contractual Maternity Pay (CMP) is a term used to describe payments made to women on maternity leave from their employment. ‘Contractual’ in this context stems from an agreement between the employer and the employee whereby the:

• employer agrees to pay CMP on condition that the employee returns to work after an agreed period; and
• employee agrees to repay the CMP if she does not return to work.

These regulations provide that refunds of NICs may be made on that part of CMP repaid or due to be repaid after that date:

• to both the employer and the employee where CMP has been repaid; or
• where the employee has not repaid CMP but the employer has taken all reasonable steps to recover it, to the employer only.

A woman who is due to repay CMP but does not do so is not entitled to a refund because the earnings on which she paid NICs originally are still in her possession.

Prior to these regulations coming into force no refunds were due.

Refund of part of National Insurance contributions

There will be some instances where, as a result of paying Class 1 NICs on CMP originally, a woman may qualify for and receive, contributory benefit. Where she receives CMP and then becomes entitled to a refund of NICs, this may affect her entitlement to contributory benefit already paid. Therefore, where benefit has already been paid on the strength of any NICs now due for a refund, but which would not have been paid had the NICs not been paid in the first instance, benefit must be recovered from the employee’s refund before a refund is made. The employer’s refund is not affected.