Small business maternity pay: Rules and responsibilities
In this article
For many small businesses, paternity leave and maternity leave can be challenging to manage. After all, not only are you going to be down a member of your team, but you’ll also need to cover their expected maternity pay.
But while this sort of framework may be well established in larger companies, you might be unsure about the rules around small business maternity pay. Are there any relief processes in place to help your company make up for any shortfall?
Well, most small businesses are eligible for something known as small employer relief, which can help to cover the vast majority of expected maternity relief costs. Take a look below to learn more about your small employers relief eligibility, and the rules around maternity leave pay.
Who is eligible for statutory maternity leave and pay?
Statutory maternity pay is an expected benefit to be provided by all employers, assuming your employee is contracted under your business. It may be taken so long as your employee meets the maternity leave criteria, and they may take up to the full 52 weeks offered should they choose to do so.
In order to qualify for maternity leave, your employees must meet the following criteria:
- Have an employment contract with your business and be on your payroll in the 15th week before the expected week of childbirth (the qualifying week).
- Have worked for you continuously for at least 26 weeks up to any day in the qualifying week.
- Give you the correct notice period before requesting leave (i.e., let you know the expected birth date and when they want to start their maternity leave at least 15 weeks in advance).
- Earn at least £123 a week.
- Provide proof that they are pregnant (usually a MATB1 certificate or doctor’s letter).
Assuming an employee qualifies for maternity leave, you cannot refuse their maternity leave – nor can you change the amount of leave employees want to take. You can only delay the start date for leave or pay if the employee has given you the wrong amount of notice and doesn’t have a reasonable excuse for this.
In this case, you should write to them with details of the delayed start date within 28 days of their leave request.
Who pays maternity leave?
If your employee qualifies for maternity leave, it’s on you to provide company maternity pay for at least 39 weeks, and possibly more. This is a legal requirement under their employee rights and cannot be ignored.
Do employers have to pay maternity leave?
Technically speaking, company maternity pay is only guaranteed if those working for you are classed as employees. However, considering that almost all people working fall under this category, you are required by law and employee rights to offer and pay for maternity leave.
That being said, some employees, such as agency workers, casual workers, and company directors are subject to different entitlement rules – the government website has more details.
Please note that, if your employee does not qualify or is not entitled to SMP, you must give them an SMP1 form instead, as they may be entitled to claim a maternity allowance from HMRC. Maternity allowance is not claimed via your business, and it needs to be claimed using an MA1 claim form online or via a Jobcentre.
What is small employer relief pay?
While it is true that you'll need to financially pay and reorganise to cover an employee's maternity leave, company maternity pay is far less of an expense than you might realise. In fact, there is a dedicated government scheme in place that will repay between 92% and 103% of statutory maternity pay, so long as you qualify for small employers relief eligibility.
How do you reclaim maternity pay for employers?
In order to qualify for small employer relief eligibility, you need to be a small business and have paid less than £45,000 in Class 1 National Insurance contributions for your employee(s) in the last complete tax year. Doing so means you can reclaim 103% of your company maternity pay.
Your payroll each month will show you what you have paid in statutory pay, and some payroll software can even calculate how much you can claim back, and produce an ‘employer payment summary’ (EPS) for you to send to HMRC.
You’ll need to send this EPS to HMRC each month for which you’re reclaiming statutory pay, before the 19th of the following month. However, you can write to the PAYE Employer Office to ask for a repayment if you cannot set off the payments against the current year’s liabilities, though you cannot do this until the start of the next tax year.
Small business maternity pay record keeping
While employees are taking maternity leave, and upon their return, you must keep records for HMRC for three years from the end of the tax year their length of leave relate to, including:
- Proof of pregnancy
- The date SMP began
- Your SMP payments and dates of payments
- The SMP you have reclaimed
- Any weeks you didn’t pay and why
This is so that, should HMRC want to inquire about company maternity pay further, you can provide all the necessary details they expect.
What are employee maternity leave rights?
As part of their employee rights, those on maternity leave can take up to 52 weeks of leave. The earliest that leave can start is 11 weeks before the due date - unless the baby is born early - with the first 26 weeks being known as ordinary maternity leave, and the next 26 weeks as additional maternity leave.
If the baby is born early, then leave starts the day after the birth. Your employee must give you the child’s birth certificate or a document signed by a doctor or midwife that confirms the date of birth, and then you need to write to them confirming the new end date for their leave.
In terms of maternity pay directly, you be expected to adhere to the following:
- Statutory Maternity Pay (SMP) must be paid to eligible employees for up to 39 weeks.
- For the first six weeks, this is 90% of their average weekly earnings before tax.
- For the following 33 weeks, this drops to either £172.48 or 90% of your average weekly earnings (whichever is lower)
- Tax and national insurance must be deducted from these figures.
- Your employee’s employment rights (such as the right to pay, holidays, and returning to their job) must be protected during maternity leave.
- All employees must take two weeks (or four weeks if they work in a factory) compulsory maternity leave immediately after the birth. They cannot work or use a keeping-in-touch day during that time.
- If your employee decides not to return to work following their maternity leave you must still pay them the SMP they’re entitled to. You cannot ask them to repay it.
Please note that you can pay more than the statutory amount if you have a company maternity scheme, but there is no legal requirement for you to do so.
Other rules around maternity leave
Besides their expected pay, employees on maternity leave are only expected to stay in contact or work for you for up to 10 days during the period of their maternity leave - any more than this and they could lose their SMP or maternity leave.
These days are called keeping-in-touch days and are designed to help your employee maintain contact with the workplace, undertake any training, or work for you on the odd occasion where you feel their presence is needed. However, you cannot demand that your employee attend these keeping-in-touch days.
Instead, before working for you during any keeping-in-touch days you and your employee must agree to the following:
- What work they will be doing on these days.
- Whether the keeping-in-touch days are used singly or in blocks – noting any work undertaken (even as little as an hour) will count as a whole keeping-in-touch day.
- How much they will be paid for working during the keeping-in-touch day. You can count the SMP towards their contractual payment, but you must ensure they receive the full amount of SMP and that this is equal to the minimum wage for the amount number of hours they have worked – if not you must pay them up to the minimum wage to comply with statutory obligations.
Grow your business with Which?
As a Trusted Trader, you’ll get your very own business profile on the Which? website for you to display work and reviews, as well as access to an account manager and our support network.
Get in touch to find out more about qualifying to become a Which? Trusted Trader, and take a look at our advice guide hub for more insights and guides around running your small business – such as tips on how to reduce workplace stress, and how to build and inclusive business.
