How does maternity pay work? Part 1: Statutory Maternity Pay

And that means dealing with Statutory Maternity Pay and all the related changes to this person’s pay in your payroll system.

Getting your head around maternity pay, and the various rules about when and how it’s paid, can be a complicated business. So we’ve pulled together this short guide that gives you the complete lowdown on how Statutory Maternity Pay works.

Who’s eligible for Statutory Maternity Pay?

As long as they’re an employee of the business, all women on your team are eligible to take maternity leave. But to also get paid Statutory Maternity Pay (SMP) while they’re on leave they need to meet a few conditions.

• They must earn on average at least £112 a week.
• Give you the correct notice – 15 weeks before the expected birth date if taking maternity leave and 28 days’ notice if due to receive SMP.
• Give you proof that they’re pregnant – usually a MATB1 certificate, which should be provided by their midwife.
• Have worked for you continuously for at least 26 weeks up to the ‘qualifying week’ – the 15th week before they expect baby to arrive.

If they meet those criteria, then it’s your job to pay them their SMP, once they’re started maternity leave and have become a new mum.

There are also a few rules around when they can take their maternity leave:

• Your employee can take up to 52 weeks’ maternity leave – the first 26 weeks being ‘Ordinary Maternity Leave’, the final 26 weeks being ‘Additional Maternity Leave’.
• The earliest they can take their leave is 11 weeks before the expected birth of the baby, unless the baby is born early.
• Employees must take at least two weeks’ leave after the birth.

How long is SMP paid for?

So, your employee has proved they’re eligible for SMP and has started their maternity leave – now it’s time to start paying them.

SMP is payable for up to 39 weeks, usually as follows;

• For the first 6 weeks – you’ll pay 90% of the employee’s average weekly earnings (AWE) before tax.
• For the remaining 33 weeks – you’ll pay them £140.98 per week or 90% of AWE (whichever is lower).
• Tax and National Insurance are still deducted as normal from their earnings.
• You can pay your employees more than the SMP rates if you want to – it could be a valuable part of your benefits package, for example. But you must make sure your maternity leave policies are made clear to employees from the start, though.

How to reclaim your SMP

You’re probably already mentally calculating the cost to the business of paying this SMP. But, don’t worry, you can claim back the majority of your SMP costs.

You’re able to claim back 92% of the SMP you pay out as an employer. You do this through your payroll by filing an Employer Payment Summary (EPS) to HMRC. And if you qualify for Small Employers Relief (SER) then you can claim back 103% of any SMP paid (now that’s good news for baby and business!)

• To qualify for SER you must have paid £45,000 or less in Class 1 National Insurance in the last complete tax year before:
  • the ‘qualifying week’ – the 15th week (Sunday to Saturday) before the week of the due date.
  • the ‘matching week’ – the week (Sunday to Saturday) your employee was told they’d been matched with a child by the adoption agency.
  • the date on the official notification if your employee is adopting a child from another country.
• If you can’t afford to pay SMP, and wait for the reclaimed cash to be repaid, then you can apply to be paid in advance. You can apply up to four weeks before you want the first payment (note that HMRC may return your application if you apply earlier).
• You’ll need to send an EPS for each pay period you reclaim statutory payments against – even if you got an advance payment from HMRC to cover statutory payments to your employees.
  • If the statutory payments you reclaim are more than your PAYE deductions for that month, HMRC will automatically use what’s left to reduce what you owe on your advance payment.

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