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An employee who’s on maternity leave may be entitled to statutory maternity pay (SMP), depending on her earnings and length of service.  If she qualifies the employer has to make these payments which, certainly for the first 6 weeks, can be quite substantial.

The good news is that a small business can recover 103% of the SMP that they pay, direct from HMRC.  A business is classed as ‘small’ if it paid less than £45,000 of class 1 national insurance contributions in the previous tax year.

In a small family business, there’s an opportunity to make the most of SMP for the first six weeks of maternity leave, whilst also receiving a significant contribution from the government.

Where an employee earns at least £111 per week, the employer must pay SMP as follows:

  • for the first 6 weeks – 90% of the employee’s average weekly earnings (AWE)
  • for the remaining 33 weeks  – the lower of £138.18 or 90% of the AWE

The AWE is calculated based on 8 of the first 25 weeks of the pregnancy.  If the employee receives a bonus in this time, the AWE, SMP and employer’s national insurance will increase.  This means the company would be able to recover additional funds from HMRC.

If you currently employ an expectant mother who is due to be paid a bonus, you might like to consider the timing of the payment as both the employer and employee could benefit.

If you’d like more information regarding SMP, or would like to discuss out-sourcing your payroll altogether, please take a look at our payroll services, or contact us for more information.


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