Helen Kingdon explains the process of maternity leave and how employers can reclaim this.
The cost of employing someone who goes on to claim for UK statutory maternity pay, can feel like yet another in a long list of financial commitments and administrative requirements for growing, owner managed businesses. Thankfully, it's not the financial hole it might at first appear. You see depending on the size of your business you should be able to claim all, or certainly most, of this money back from HM Revenue & Customs (HMRC).
Keep reading to understand the process of maternity leave and how to recover this expenditure from the government.
Your employees are entitled to up to 52 weeks maternity leave. As an employer, you have to pay 39 weeks of statutory maternity pay (SMP) to new mothers. That is the minimal requirement however, you can be generous and offer more if you so please. The first 26 weeks (6 months) is known as ‘Ordinary Maternity Leave’ and the last 26 weeks is known as 'Additional Maternity Leave'.
SMP is the legal minimum you must pay employees for this type of leave. Employees qualify if they:
Earn at least £113 a week on average
Have worked for the employer for 26 weeks prior to the 15th week before their due date
SMP has to be paid at 90% of average weekly earnings before tax for the first 6 weeks. The employee has to provide you with their MATB1 form from the midwife once they've received it. The information on this form ascertains the qualifying weeks and the amount to be settled to the employee for the 6 weeks at the required 90% pay.
After the 6 week period, you either continue to offer this figure or £140.98 a week (whichever is lower) for the remaining 33 weeks. A Mother can take a further 13 weeks of maternity leave on top of that but this then goes unpaid.
The earliest maternity leave can be taken is the 11th week prior to the due date. If the baby is born early then the leave starts on the day after the birth. The employee must give you the child’s birth certificate or documents signed by a doctor or midwife that confirms the date of birth. You must write to them confirming the new end date for their leave.
To claim SMP, your employee must tell you that they're going on maternity leave and make this request at least 15 weeks before the baby is due. This all highlights the need to communicate your policies and rules very clearly with staff if you have a maternity scheme.
If your business has paid less than £45,000 in class one national insurance contributions over the last tax year then you can claim the full sum of SMP as well as an extra 3% on top. If you're a larger employer, then you can claim back 92% of the SMP you've paid out!
Check your payroll software, if you use such a product, as this may have the functionality to both calculate your claim as well as put the paperwork together for HMRC to process your refund.
Where your payroll contain directors or employees where PAYE payments are minimal each month this means there will be little to no PAYE liability to offset the maternity reclaim against. As an employer therefore you can claim the funding in full in advance of the maternity starting. It's then deposited into your business bank account within 10 days of the claim being made.
The content of this post is up to date and relevant as at 13/02/2018.
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