The ultimate guide to Maternity

It's very common for employees to temporarily leave their jobs to have a baby. As an employer, you have a legal obligation to ensure they receive the right maternity benefits.

In this guide, we'll look at what maternity pay and leave are, how much is given, and ways to ensure employees are financially supported during leave.

If you need immediate support, get in touch with one of Croner's experts here 0800 141 3806.

Maternity pay

Maternity pay is offered to employees to help them financially as they raise their new baby.

If they don't get statutory maternity pay (if they’re eligible), you could end up facing discrimination claims, compensation penalties, and reputational damage

There are other variations to maternity pay that employees can be entitled to. For example:

Statutory Maternity pay

Statutory maternity pay (SMP) is a financial payment given to employees on pregnancy and maternity leave. Employers must provide the payment as a legal entitlement under parental leave rights.

Maternity pay is provided up to and including the 39th week of maternity leave

Employees get statutory maternity pay in the following ways:

• First six weeks of maternity leave: 90% of their average weekly earnings (before tax).
• Next 33 weeks of maternity leave: 90% or £ of their average weekly earnings (whichever one is lower).
• Last 13 weeks of maternity leave: Unpaid unless contractual maternity pay is provided.

Employees receive statutory maternity pay in the same way as normal wages. So, employees will have tax, pension contributions, and National Insurance deducted accordingly.

Contractual Maternity Pay

You may decide to offer pregnant employees more than the statutory maternity pay amount.

Contractual maternity pay is a financial amount given to those on maternity leave; it's often higher than the legal minimum amount. It's also known as 'enhanced maternity pay' or 'occupational maternity pay'.

Employers may choose to offer more generous maternity benefits alongside this payment. Contractual maternity pay helps employees going through financial hardships; and can encourage employees to return to work after their maternity leave ends.

However, if an employee decides not to work again, they'll need to repay the full amount that goes beyond the statutory minimum. (You can decide whether it's in small installments or as a lump sum – whatever’s agreed to in their contracts).

Maternity Allowance

Maternity allowance (MA) is a financial benefit available to those who are self-employed. Part-time workers can apply for Maternity Allowance if they qualify for SMP.

Those who are eligible to claim maternity allowance (whichever is lower) will receive :

1. £172.48 as weekly average pay for 39 weeks (under the same employer), or
2. 90% of their average earnings per week.

Occupational Maternity Pay

Occupational maternity pay, also known as contractual maternity pay,  is an optional payment that you can make as an employer.

You pay it on top of the Statutory Maternity Pay that you can pay your staff while they're on maternity leave. When one of your staff goes on maternity leave, you must pay them Statutory Maternity Pay (SMP).

There is a minimum amount of SMP you must pay your staff each month. And you pay it just like you would their salary—so yes, tax and National Insurance deductions still apply.

How to provide statutory maternity pay?

One of the biggest challenges employees on maternity leave face is a shift in their financial situation.

That's why they get statutory maternity pay through your payroll system. By doing so, you'll be able to protect their welfare throughout these complicated times.

Here are ways to provide statutory maternity pay to your employees:

Create a statutory maternity leave policy

Statutory maternity leave is a period of authorised absence that employees take when having a baby. When employees are ready to request this form of parental leave, you must provide information on the suitable guidelines.

By creating a maternity leave policy, you'll be able to manage all duties and predicaments that may occur. It can also answer maternity pay questions that are frequently asked by employees. For example, 'can you take your first 26 weeks of leave before your baby is due?' Or, 'should I take additional or ordinary maternity leave?'

Make sure employees can reach out to you, the HR department, or occupational health for further advice.

Maintain employment entitlements

Despite receiving paid maternity leave and pay, employees may still experience a financial strain from the cut in their wages. Even if they're currently not working, you must maintain their employment entitlements during maternity leave. For example:

• Pay rises and bonuses
• Holiday entitlements
• Return to work
• Protection against discrimination
• Information on workplace developments

Some employees may be eligible for financial support allowances like Employment and Support Allowance (ESA), Universal Credit (UC), and Child Tax Credit.

Provide maternity pay to all eligible employees

Both full-time and part-time employees are eligible for maternity pay; they simply must be considered an employee.

They simply need to be part of your workforce, regardless of whether they have 'employee' status or not.

Part-time employees are entitled to:

• Maternity leave
• Paternity leave
• Shared parental leave
• Parental bereavement leave
• Adoption leave (along with statutory adoption pay)

Self-employed people are only entitled to Maternity Allowances, but other benefits may be available depending on their contracts. If an employee has multiple jobs, they can receive maternity pay from more than one employer.

Help employees return to work after maternity leave

Most pregnant employees will take their full 52 weeks of statutory maternity leave. But during this time, many are torn between staying at home or returning to work.

Employers can ease worries about returning to work in numerous ways. For example, you can offer a phased return, flexible working conditions, or paid time off for childcare.

Employees need to confirm their return no less than eight weeks before the 52 week-period ends. They should also be given the same job or a similar one (at the same position and pay).

If an employee is adamant about not returning, you may decide on mutual resignation. This is a preferred option; just ensure they still receive their statutory maternity pay until their last day.

How much is statutory maternity Pay?

UK Statutory Maternity Pay (SMP) is paid for up to 39 weeks. On 1 April 2018, Statutory Maternity Pay in the UK increased to £145.18 or 90% of the employee’s average weekly earnings. Maternity pay eligibility requires the staff member to be legally classed as an employee.

Maternity pay entitlement is for 39 weeks. This is on the condition that the employee has been continuously in your employ for 26 weeks by the time they must inform you of the pregnancy.

They must also have average earnings of at least £116 per week (from April 2018) in the eight weeks (the ‘qualifying week’) before the 15th week, before the 'expected week of childbirth' (EWC).

Employees who haven't worked for 26 weeks will have to claim maternity allowance.

How statutory maternity pay works

When an employee is having a baby, they’re entitled to a year of statutory maternity leave. This is true no matter how long they’ve been in the job. To be eligible for this, an employee must:

• Have an employment contract (it does not matter for how long.)
• Give you the correct notice.

While an employee is on maternity leave, employment law still entitles them to the employee rights they normally have, such as:

• Paid holiday
• Protection from unfair dismissal
• Pension payments and rights during the period of Statutory Maternity Pay payment
• Any other employee benefits (e.g. gym membership, medical insurance) for your whole maternity leave period

How much is statutory maternity pay

UK Statutory Maternity Pay (SMP) is paid for up to 39 weeks. On 1 April 2018, Statutory Maternity Pay in the UK increased to £145.18 or 90% of the employee’s average weekly earnings. Maternity pay eligibility requires the staff member to be legally classed as an employee.

Maternity pay entitlement is for 39 weeks. This is on the condition that the employee has been continuously in your employ for 26 weeks by the time they must inform you of the pregnancy.

They must also have average earnings of at least £116 per week (from April 2018) in the eight weeks (the ‘qualifying week’) before the 15th week, before the 'expected week of childbirth' (EWC).

Employees who haven't worked for 26 weeks will have to claim maternity allowance.

Calculate average weekly earnings (AWE)

You must determine whether the employee is eligible for SMP. To do this, take all earnings paid in the relevant period (this is usually the 8-week period before the employee is due to go on maternity leave) and divide the earnings by the number of weeks in that period. If they earn £116 or more in the tax year, they are eligible for SMP.

The first six weeks

90% of the employee’s average weekly earnings (before tax). So if your employee normally earns £400.00 a week, they will receive £360.00 a week. Tax and National Insurance deductions will occur, as with a normal wage.

The following thirty-three weeks

Since April 2018, the current rate is £145.18 per week (or, if lower, 90% of the employee’s average weekly earnings).

Who pays for statutory maternity pay

You must pay Statutory Maternity Pay (SMP) just like you would pay a salary. You can usually reclaim 92% of maternity payments from HMRC.

If your business qualifies for Small Employer’s Relief, you might be able to reclaim 103%.

If you pay less than £45,000 in class 1 National Insurance, you will qualify for Small Employer’s Relief.

How maternity pay is calculated if the employee has a pay rise

Firstly, if a pay rise is due, you must not withhold it because of maternity leave. If the pay rise is effective during the relevant period, ensure you include the rise in the calculations of AWE. And if the pay rise comes into effect after calculating AWE, you need to recalculate AWE with the pay rise implemented from the start of the relevant period, and pay any difference due.

You must pay any difference that a pay rise causes, even if your employee doesn't intend to return to work. In cases where you agreed on the rise before their maternity leave, but they then terminated their employment, review contract terms. You need to find out whether they're eligible to benefit from the pay rise.

Will Breaks in Employment Change the Maternity Leave Salary Calculation?

The break should not influence the calculation but may affect whether the employee is applicable for SMP. The following breaks are allowable:

• Temporary cessation of work
• Public holidays
• Sickness and injury, as long as the period of absence is 26 weeks or less
• Previous maternity, parental, or adoption leave

The calculation shouldn't change, but if the employee takes a break that isn’t one of the above, and doesn’t have 26 weeks of continuous employment, they lose their SMP entitlement. If this is the case, the employee can apply for a maternity allowance.

How do you qualify for statutory maternity pay?

In order to qualify for statutory maternity pay, employees need to meet these eligibility criteria beforehand:

• Earn at least £123 per week as average pay (on average for 8 weeks before the qualifying week).
• Give at least 28 days of notice.
• Provide the employer proof of their pregnancy.
• Have at least 26 weeks' of continuous service into the 'qualifying week'. This is the 15th week before the baby's due date (expected).

To get a rounded idea of how much employees are entitled to, use a maternity pay calculator.

What is the UK law on statutory maternity pay?

Under UK laws, there are certain legal rights that pregnant and 'new parent' employees are entitled to.

You cannot discriminate against anyone based on pregnancy and maternity matters. The Equality Act 2010 recognises the two terms as protected characteristics. So, every employee is protected against pregnancy and maternity discrimination.

This legal right extends to same-sex couples, as well as mixed-sex ones. For example, a pregnant employee is entitled to maternity leave and pay, as well as shared parental leave (SPL) for their civil partner.

There are serious consequences for unfair treatment or neglecting maternity pay rights. If you cannot afford or refuse to pay staff SMP, employees may raise their issue to the HM Revenue & Customs.

Is maternity pay taxable?

Yes, maternity pay is taxable. An employee receives deductions for tax and National Insurance on their Statutory Maternity Pay (SMP). This is no different to when they receive a normal wage slip. The employee still receives deductions for tax and National Insurance from maternity payments.

Maternity leave

Statutory maternity leave is 52 weeks, which comprises:

• Ordinary Maternity Leave—first 26 weeks (six months.)
• Additional Maternity Leave—last 26 weeks (six months.)

Employees don't have to take the full 52 weeks but must take at least 2 weeks' leave after the baby is born.

Of this leave, you are entitled to 39 weeks, made up of:

• 6 weeks getting 90% of your average weekly pay (before tax).
• 33 weeks getting either £151.20 a week or 90% of your average weekly pay (before tax) - whichever is less.

Giving maternity leave notice

An employee must tell you about their pregnancy at least 28 days' notice to qualify for 52 weeks’ statutory maternity leave. If you want it in writing, they must submit it this way.

In this, they must state that they wish to stop work to have a baby and state the day they want their SMP to start. Alongside the notice, they must provide proof of pregnancy. This is usually a doctor’s letter or a maternity certificate (known as an MATB1 certificate).

You must confirm within 28 days how much SMP the employee will get and when it will start and stop. If you decide they’re not eligible, you must give them the SMP1 form within 7 days of making your decision and explain why.

Shared parental leave

If the employee has a spouse or civil partner, they may wish to use Shared Parental Leave (SPL). The eligible staff members share up to 50 weeks of leave within the first year after their child is born (or adopted).

Parents can choose to take the leave separately or together or they can split the time, or stagger leave and pay. Eligible parents who are sharing responsibility for a child can get SPL in the first year after:

• The birth of their child.
• Adopting a child.
• Getting a parental order if they had the child through surrogacy.

Workers, including agency, contract and zero-hours workers, are not entitled to SPL. However, they might be able to get Shared Parental Pay.

Maternity allowance for the self-employed

If you're self-employed, or your business makes use of self-employed persons, you might be wondering about maternity pay and maternity allowance. Are these options available?

The answer is yes. If an individual is self-employed but also has another job, they might be eligible for Statutory Maternity Pay (SMP). However, like every other employee, there are certain criteria that they must meet to get SMP. If they don't meet them, there are other options available, such as maternity allowance (MA).

Are self-employed workers entitled to statutory maternity pay?

Self-employed individuals are very unlikely to get SMP unless they're working an extra job. You might be able to claim SMP from your employer, as long as you meet the expected requirement of being under their employ for 26 weeks or more.

If you're eligible for SMP, then you can't claim maternity allowance. If you're unable to claim SMP then your best option is seeing if you can claim maternity allowance.

Am I eligible for a maternity allowance?

If you're self-employed and you pay Class 2 National Insurance, then you should be eligible to claim maternity allowance. You'll also need to prove self-employment for at least 26 weeks and earn a minimum £30 per week for 13 weeks. The 13 weeks don't need to be consecutive. It's essential that you pay National Insurance for at least 13 weeks of the 26 before your child is due.

If you don't, you'll still get maternity allowance, but at a much lower rate of £27 per week, rather than £145.18 per week. You're also eligible for maternity allowance if you recently left a job or you're at work but you don't qualify for SMP. So, if you're self-employed, but recently left your "employed" job, you should check whether or not you qualify for SMP. If not, check to see whether you're eligible for the full amount of maternity allowance for self-employed individuals.

How do I apply for maternity allowance if I’m self-employed

Apply for maternity allowance via the maternity allowance claim form, which is available on the Government's website. You'll need to send this, once you've completed it, to the address on the form. The claim form is over 20 pages long. Filling it out can be a daunting task.

Don't attempt to complete the form on a lunch break or when you happen to have a spare moment. Carve out a chunk of your day to give the task the attention it requires. Also, don't let the sheer size of the form put you off filling it out. Delaying will only complicate matters if there are any issues with your claim.

Other benefits

Self-employed maternity pay is a complex and time-consuming matter, but the sooner you tackle it, the better. Once maternity pay is out of the way, you can think about looking at other benefits. You could be eligible for the Sure Start Maternity Grant if this is your first child, or your partner receives a jobseeker's allowance.

The Sure Start Maternity Grant is a one-off payment of £500 to help with the costs of a newborn baby. Child Tax Credit is another benefit for assistance with the costs of raising a child. To receive a Child Tax Credit, you must meet the criteria.

Do agency workers get maternity pay?

Agency workers can get maternity pay if they meet the same qualifying conditions.

The agency worker must prove they were in continuous employment or in engagement with the agency. They must prove this for the 26 weeks by the 15th week before the EWC to meet the conditions of ‘continuous employment.’

Taking annual leave or sickness absence does not break continuous employment.

Qualifying Criteria: How can agency workers get statutory maternity pay?

For an agency worker to qualify for Statutory Maternity Pay (SMP), they must:

• Have told the agency about their pregnancy, and the date upon which they expect their SMP to start.
• They have earned at least (or above) the current Lower Earnings Limit (LEL) in an eight-week period. As of 2018/19, the Lower Earnings Limit is £116 per week.
• Be involved with the same agency for a continuous 26 weeks by the start of the 15th week before the expected week of childbirth. She must remain engaged by the same agency in the qualifying week.

If an agency worker is unable to accumulate 26 weeks' continuous engagement because they're on paid annual leave, or they're off for sickness, or the agency has no work to offer, then they can still qualify for SMP.

Maternity Rights for agency workers

It is illegal to discriminate against agency workers on the following grounds. The agency worker:

• Is pregnant.
• Gave birth within the last six months.
• Is breastfeeding.

The following actions are also examples of discrimination if to do with the agency worker's pregnancy:

• The agency refuses to place the worker in a job.
• The hirer refuses to hire the agency worker.
• The hirer terminates the job because the agency worker is pregnant.
• The agency refuses to keep the pregnant worker on its books.
• The agency only offers pregnant workers short jobs, saving longer opportunities for other agency workers.
• The hirer refuses to let the worker come back because the worker took leave for maternity.

Health Risks to Agency Workers

A hirer should make reasonable adjustments so that a pregnant worker or new mother worker can do their job successfully. If this is not possible, the agency must find alternative work for the worker, or pay the worker at the same rate for what would've been the length of the contract.

Antenatal care for agency workers

Once an agency worker has 12 weeks in one job, they can get paid time off to attend antenatal care if it's not possible for the worker to arrange the antenatal care outside of their working hours. They will also be eligible for the payment if their travel time is during their working hours. Antenatal care includes antenatal classes, appointments, and—if a doctor or midwife recommends them—parenting classes.

Maternity leave for agency workers

Agency workers cannot take maternity leave, adoption leave, or shared parental leave. Currently, only people with the employment status of employees have access to these rights.

Redundancy on maternity leave

When it comes to redundancy and maternity leave, we have seen employers make mistakes that resulted in a tribunal claim. Keep in mind you might have to prove you did not simply consider letting your pregnant employee go because of their personal situation. Making a mistake when resorting to redundancy during maternity leave could cost you dearly if it comes across as discrimination.

Can you make someone redundant on maternity leave?

Most employers ever faced with this situation will ask the question. And they should. Proceeding without covering relevant aspects can lead you to making mistakes. It can also lead to loss of trust within your company, loss of time necessary to make amends, and loss of reputation.

If you have to make your employee redundant whilst on maternity leave, think how this will look to a neutral observer. Have you considered all the available options first?

Approach the situation with this in mind, and remember that, by law, you need to:

• Ensure redundancy is a genuine and the most feasible option. Be ready to prove it if necessary.
• Consider alternatives - offer employment on a different job role, or voluntary redundancy with financial compensation.
• Use non-discriminatory reasons for choosing the respective employee(s).
• Consult with them and keep them informed at every stage of the process.
• Communicate clearly throughout and do not leave anything out that could trigger claims of discrimination.

A very simple example of what could make employees feel discriminated against relates to their gender. If an employer ends up making redundant mostly female employees, they chance a discrimination claim. Check the percentage of women made redundant out of the total workforce of the female gender employed. If most of your staff are women, then inevitably they will be affected in higher numbers by redundancies.

Checks before making an employee redundant on maternity leave

Start by asking yourself how solid your reasons for making staff redundant.

Would they stand in a tribunal?
How easily could the employee make a redundant dispute that you have genuine reasons for it?

If the nature of their job makes it less essential within the current economy, you have a good start. You might have to also demonstrate that you cannot create or offer them another position to fit their skills and knowledge. This general rule of thumb applies in any situation when a member of staff is made redundant. 

Also, consider how much your business depends on this job, weighed against costs to the company. If you lose business by keeping their position for the foreseeable future, with no alternative solution available, then being made redundant on maternity leave remains the only option. 

Once you analysed all the relevant aspects, and you decide you need to proceed, think of how it will impact the employee. Don’t wait for them to ask - can I be made redundant on maternity leave? Not only can this raise questions about the fairness of the process, but risks creating more tension. Show them you understand the stress that this situation causes and support them the best you can throughout.

For the employee made redundant on maternity leave, this might mean they leave on good terms.

If you have genuine concerns over the negative impact of your decision, you can negotiate voluntary redundancy.

Taking voluntary redundancy whilst on maternity leave

Use this path, when you can, in such a way as to offer a preferable solution to your employees. You will basically give them the option to volunteer themselves for dismissal, so think about why they would do this. This applies to all your employees, including pregnant ones. Do not risk them feeling pressured into it, as again it could turn into a costly tribunal affair.

By offering them a severance package, which involves a sum of money and/or benefits, you will give them a reason to volunteer. You don’t have to do this, but you have to ensure you pay statutory redundancy and maternity leave.

Remember that the employee needs to put themselves forward for this option. Communicate that they can, at a preliminary stage, and allow for them to decide. Once you start voluntary redundancy, if you revert to dismissing employees you might end up fuelling workplace conflict.

There is one situation when you cannot follow either of the paths we’ve discussed so far. If you think of making somebody redundant before maternity leave starts, it will not help you or your business. You will still have to give them both the redundancy pay and maternity leave pay. 

It’s probably best that, if your employee will go on maternity leave, you take your time and make the right decision. Rushing things will spare you no money, nor will it help your relationship with them.

You can still choose redundancy shortly after maternity leave, and the same entitlements as in any similar situation will apply.

Get expert advice

Whether you hire one employee or an entire workforce, you need to calculate and offer the correct maternity pay to your staff.

If you avoid paying their legal financial rights, you could end up facing tribunal hearings, compensation fees, and reputational damages.

But you don’t need to sort it all out on your own. From the stage of putting together an employment contract to other necessary documentation, our HR advisors are here to help.

Have questions about statutory maternity pay? Speak to a Croner expert for any HR or employment law issue today on 0800 141 3806.