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Employment Act 2002

Section 4: Statutory Adoption Pay

32.This section contains provisions establishing a new statutory right to Statutory Adoption Pay for adoptive parents around the placement of a child for adoption. Statutory Adoption Pay will be available to an adoptive parent of a child newly placed for adoption - it will not apply to step-family adoptions or adoptions by a child’s existing foster carers where there is no new placement - whether the child is being adopted within the UK or from overseas. For practical reasons, there are slight differences to some elements of the provisions for domestic and overseas adoptions. Regulations will set out how Statutory Adoption Pay will apply to overseas adoptions.

33.New section 171ZN, inserted into the Social Security Contributions and Benefits Act 1992 by section 4, provides that Statutory Adoption Pay will be available for a period of up to 26 weeks. The rate of Statutory Adoption Pay will be set in regulations. From April 2003 it will be the lesser of £100 per week or 90% of the employee’s average weekly earnings.

34.Statutory Adoption Pay will be available to an employee who has met the service qualification (continuous service with the same employer for at least 26 weeks by the week in which an approved match with the child is made), has an approved match with a child, gives appropriate notification, and whose average weekly earnings are equal to or above the lower earnings limit applying to National Insurance Contributions (£75 a week from April 2002). It is planned that employees who are entitled to Statutory Adoption Pay will have an obligation to give their employer documentary evidence from an approved adoption agency to support their entitlement to pay (the same documentary evidence as for adoption leave).

35.Statutory Adoption Pay will be administered by employers in the same way as Statutory Maternity Pay. Employers will be able to recover a percentage of the amount of Statutory Adoption Pay they pay out (limited in most cases to 92%), with small employers who are entitled to Small Employers’ Relief (in 2002/3, those with NICs due in a year of £40,000 or less) able to claim 100% and an added payment (in 2002/3 of 4.5% for Statutory Maternity Pay) to compensate for employers’ share of National Insurance Contributions payable in respect of Statutory Adoption Pay. Section 7 of the Act provides for a power to make regulations to enable employers to ask for funding, if necessary in advance, from the Inland Revenue where the amount of Statutory Adoption Pay they have to pay their employees exceeds the amount of tax and NICs or Student Loan deductions that they are due to pay to the Inland Revenue. In certain circumstances, where an employer fails to pay Statutory Adoption Pay, the Inland Revenue will become responsible for the payment. Liability will also fall on the Inland Revenue from the first week in which an employer becomes insolvent.

36.The framework for Statutory Adoption Pay is similar to that already in place for Statutory Maternity Pay and Working Families’ Tax Credit. The distribution of rights and obligations between primary and secondary legislation is similar to that provided for in the Social Security Contributions and Benefits Act 1992 and Tax Credits Act 1999. As under those Acts, administrative and enforcement powers are to be conferred on the Inland Revenue. Sections 13 - 15 provide for the exchange of information about Statutory Adoption Pay between the Inland Revenue, the DTI and other relevant departments.

37.To ensure compliance the sections provide for:

  • Employers to keep appropriate records and to make periodic returns to the Inland Revenue

  • Employers to produce those records for inspection by the Inland Revenue

  • Employers to provide information about entitlement to their employees

  • The Inland Revenue to be able to obtain information from both employers and applicants for Statutory Adoption Pay

  • The Inland Revenue to impose penalties where there is refusal or repeated failure to comply

  • The Inland Revenue to make decisions on entitlement in the event of dispute

  • Appeals against decisions made and penalties awarded to be heard by the independent Tax Commissioners

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