In this article, we will discuss Maternity and Paternity Leave and the rules and guidance surrounding these benefits, including eligibility criteria, time off entitlements, and the statutory pay that can be claimed
Eligibility
Directors:
If you are a director claiming statutory maternity pay (SMP) you will need to consider the following:
You cannot work whilst receiving statutory maternity pay/allowance aside from up to 10 keep-in-touch (KIT) days.
This means if you are a sole director an SMP claim may be hard to justify unless you hire someone else in your absence to carry out your responsibilities. Alternatively, if you can justify the company can be managed through the 10 KIT days alone.
Sole traders:
If you are a sole trader you will need to apply for maternity allowance instead of SMP since you are not considered an employed worker. You can read more about maternity allowance further into this article.
Statutory Maternity Leave
Eligible employees can take up to 52 weeks of leave. The full 52 weeks do not have to be taken but the employee must take a minimum of 2 weeks of leave after birth.
Eligibility:
An employee will be eligible for statutory maternity leave as long as notice is given at least 15 weeks before the due date.
Start Date:
The earliest an employee can start their leave is 11 weeks before the expected week of childbirth.
Leave will also start automatically if:
- the baby is born before the intended leave start date. Leave will start from the day after birth.
- your employee is off work for a pregnancy-related illness in the 4 weeks before the week the baby is due
Statutory Maternity Pay
Statutory Maternity Pay (SMP) is paid to the employee by the employer and then refunded to the employer by the government for up to 39 weeks. Your employee will receive 90% of their average weekly earnings before tax for the first 6 weeks and then £184.03 or 90% of their average weekly earnings (whichever is lower) for the remaining 33 weeks.
SMP usually starts when maternity leave starts and is paid in the same way as normal salary and is still subject to PAYE & NI as usual.
Eligibility:
To qualify for SMP an employee must
earn on average at least £123 a week
give at least 18 days’ notice and proof that they’re pregnant to their employer
have worked for the company continuously for at least 26 weeks continuing into the 15th week before the expected week of childbirth (i.e a total of 41 weeks before the due date)
If an employee is not eligible for SMP you must provide them with the form SMP1 within 7 days of this decision and explain why.
Maternity Allowance
If an expecting mother is not eligible for SMP then they may instead be eligible for Maternity Allowance directly from the government.
This is not related to the company or company payroll in any way.
The individual will get £184.03 a week or 90% of their average weekly earnings (whichever is lower) for up to 39 weeks if employed or have recently stopped working.
Self-employed individuals can get between £27 to £184.03 a week for up to 39 weeks. This amount will depend on class 2 National Insurance contributions.
The individual would need to manage maternity allowance themselves. You can find more on how to claim with HMRC here.
Statutory Paternity Leave
Employees can choose to take either 1 week or 2 weeks’ leave, this can be taken consecutively or as two blocks of 1 week. The amount of time is the same even if they have more than one child (for example twins).
Leave cannot start before the birth but can be taken at any time during the first year after the birth/adoption. The start date must be one of the following:
the actual date of birth
an agreed number of days after the birth
an agreed number of days after the expected week of childbirth
Statutory Paternity Pay
Statutory Paternity Pay for eligible employees is either £184.03 a week or 90% of their average weekly earnings (whichever is lower). This will be subject to Tax and National Insurance as usual.
Eligibility:
The employee must be one of the following
father
husband or partner of the mother (or adopter)
child’s adopter
intended parent (if they’re having a baby through a surrogacy arrangement)
Employees must also
be employed by the company up to the date the child is born
be on the company payroll and earn at least £123 a week (gross) in an 8-week ‘relevant period’
give 15 weeks’ notice
have worked for the employer continuously for at least 26 weeks continuing into the 15th week before the expected week of childbirth (i.e a total of 41 weeks before the due date)
Extra Leave or Pay
Employers can offer more than the statutory amounts for leave and SMP/SPP as part of a company policy if they wish to, this is known as enhanced maternity/paternity leave and/or pay. Only statutory amounts will be reimbursed from HMRC so any pay arrangements over this will be paid by the company.
For example
If you had a company policy that any employee who goes on maternity leave will receive 8 weeks of full pay and was on an annual salary of £25,000 (this would be £480.77 per week) then they would receive the following:
As we know, for the first 6 weeks of maternity leave the government will pay 90% of their average weekly earnings. In this case this would be £432.69 (90% of £480.77).
As this falls within the 8 weeks of full pay as per company policy the company would top up their pay to their normal weekly salary which is £480.77, therefore the company would pay £48.08 per week on top of the maternity pay received for the first 6 weeks of maternity leave.
The final 2 weeks of the 8 weeks in question, the government will pay the standard £184.03 per week. As the company is topping up to their normal pay the company would then pay £296.74 per week on top of the maternity pay received from the government.
Overall this would mean the employee on maternity leave would receive their full salary for the first 8 weeks of their maternity leave. The cost to the company would be the extra topped up to the employees full pay on top of the pay received by the government. This would be 4 weeks of £48.08 and 2 weeks of £296.74 meaning the total paid by the company would be £785.80.
After this, the remaining weeks of maternity pay would be paid at the standard rate of £184.03 per week with no top up required from the company.
If you are a director taking SMP/SPP then topping this up is worth considering if you are following the standard tax-efficient salary as this will remain most tax-efficient even during maternity/paternity leave.
Employers must also make sure leave and pay policies are clear and available to staff.
Small Employers Allowance
You will qualify for the small employer's allowance if your company NI bill was less than £45k in the tax year before the claim.
Employers qualifying for the small employer's allowance will receive 100% plus an additional 3% of the SMP/SPP reimbursed back from HMRC (i.e. 103% total).
HMRC Advance Reclaim
SMP and SPP can be claimed up to 4 weeks in advance from HMRC to help with cash flow. If you or an employee is looking to go on maternity or paternity leave and claim SMP/SPP please reach out to us to claim on your behalf.
To make this claim we will need the following:
- The name of the employee taking leave
- If they are taking maternity or paternity leave
- A MATB1 form (they should get this from the midwife)
- The date the leave/pay will be starting
- The number of weeks of SMP/SPP they will be taking
- Confirmation on whether you will be topping up their pay
- Your phone number (as the director)
If you have any questions or concerns on any of the above information please do not hesitate to reach out to our team. We are here to help and support you & your business in any way we can.