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 one of a long list of financial commitments. It's also another administrative requirement for growing, owner managed businesses.
Thankfully, this is not the financial hole it might at first appear. Keep reading to learn more about how maternity leave works. Plus, importantly you'll discover how to recover expenditure related to it.
Who pays statutory maternity pay? Employer or the government?
Who pays UK statutory maternity pay (SMP) depends on the size of the business. An employer can claim potentially all, or most, of this money back from HM Revenue & Customs (HMRC) depending on their class one National Insurance contributions.
How much SMP is recoverable by an employer?
If a UK business has paid less than £45,000 in class one National Insurance contributions over the last tax year, then the full SMP can be claimed plus an extra 3% on top. Larger employers, can claim back 92% of SMP.
How much SMP are employees entitled to?
Your employees are permitted to up to 52 weeks maternity leave. Employers have to pay 39 weeks of 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’. 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 their midwife. 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 weeks, you either continue to offer this figure or £148.68 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 qualification rules
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. These will confirm the date of birth. You must write to them stating the new end date for their leave.
To claim SMP, your employee must tell you that they're going on maternity leave. This request must be made at least 15 weeks before the baby is due. This highlights the need to communicate your policies very clearly with staff if you have a maternity scheme.
Put the paperwork together for HMRC to process your refund
Where your payroll contain directors or employees, where PAYE payments are minimal each month, there will be little to no PAYE liability to offset the maternity reclaim against. 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.
Paternity leave and pay
Paternity leave is available to Fathers from the birth of their child. It allows them to establish a relationship with their child, and support the mother in the first few weeks after birth.
Fathers receive 2 weeks of paternity leave, paid at the minimum statutory rate. This is supposed to be taken in one-week segments. The criteria for a father to qualify is:
To be the father of the child or;
The adopoter of the child or;
The partner or husband of the mother (or adopter) or;
The intended parent in the case of surrogacy arrangements
To qualify a father has to earn £113 per week before tax. Paternity pay is either 90% of their average weekly earnings or, the weekly rate of £140.98 (whichever is lower). If you so choose, you can top up paternity pay.
Shared parental leave and pay
An alternative type of leave is parental leave. This it taken by either, or, both parents. It allows Mothers to transfer all but the first 2 weeks of maternity leave to their partner. Known as shared parental leave, Fathers have no individual entitlement to parental leave with the rate of pay subject to you, the empoyers' discretion.
The content of this post was created on 13/02/2018 and updated on 24/10/2019
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