A simple, well-deserved pay rise for an employee on maternity leave could be exposing your business to significant compliance fines and non-recoverable overpayments.

It is called the Alabaster Rule (Alabaster v Woolwich plc).

Under UK law, if an employee is awarded a pay rise at any point during her maternity leave, her Average Weekly Earnings (AWE) must be retrospectively recalculated, and she must be paid backdated maternity arrears.

But here is where most payroll systems fail:

• The Legacy Failure: If your payroll software treats long-term absences as simple "salary overrides" on a standard monthly record, it loses all chronological awareness. When a backdated pay rise is processed, the system fails to trigger the Alabaster recalculation, resulting in an unlawful underpayment.
• The Compliance Success: A modern payroll engine treats the absence as an Independent Absence Entity with its own locked state machine. It instantly detects the salary change, recomputes the historical AWE snapshot, identifies the affected weeks, and pays the exact arrears automatically.

Let us look at a real-world scenario (meet Hannah):

• Hannah is on maternity leave. She receives a 10% pay rise, backdated to June 1.
• Under the incorrect salary-override model, she is paid her standard flat rate, receiving £0.00 in arrears.
• Under a compliant, independent entity model, her Weeks 5 and 6 are correctly recalculated, paying her £124.62 in arrears and reclaiming 92% of this from HMRC on the EPS.

Is your payroll engine fully protected from Alabaster calculation drift? Ask your engineering and compliance teams how they model multi-period absences today.

Read our full technical breakdown here: Alabaster Pay Rise Trap: Maternity Pay Compliance | DuraSuite https://durasuite.co.uk/blog/alabaster-pay-rise-trap

#UKPayroll #HRCompliance #PayrollEngineering #MaternityLeave #EqualityAct #HRTech