Where an employer is negotiating a settlement agreement with an employee who is or will be entitled to statutory maternity pay (SMP), the agreement should expressly set out the sum of SMP being paid (which will be subject to NICs) in order to discharge the employer's obligation to pay this.

In Campus Living Villages UK v HMRC & Sexton, the employer had to pay over £41,000 of SMP on top of the agreed settlement sum, as the claimant had received a substantial discretionary bonus within the 8 week relevant period used to calculate the higher rate of SMP. It was not sufficient for the settlement agreement simply to state that the agreement was in full and final settlement of all claims, as claims for SMP cannot be contracted out of. Of course employers can reclaim the majority of an SMP payment from the government.