What is Maternity Pay?

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

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.

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

What is 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 39th week of leave after the baby is born. It can be used during maternity leave or for an absence that is pregnancy-related illness (in the four weeks before your baby's due date).

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 £156.66 of their average weekly earnings (whichever one is lower).
• Last 13 weeks of maternity leave: Unpaid unless contractual maternity pay is provided.

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

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 as 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.

Employee rights on returning to work after maternity leave

When an employee is on 26 maternity leave weeks or less, they have a right to return to the same job. If they’re on longer, they have the right to return to the same job or similar position.

If you deny these employment rights, you could be liable for constructive, discrimination, or unfair dismissal. Employees may decide to raise unfair dismissal claims which can end up with you facing compensation penalties and business damages.

Are there other alternatives to statutory maternity pay?

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

Maternity Allowance (MA)

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

Those that are eligible to claim maternity allowance will receive:

1. £156.66 as weekly average pay for 39 weeks (under the same employer), or
2. 90% of their average earnings per week.

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 instalments or as a lump sum – whatever’s agreed to in their contracts).

How to provide statutory maternity pay to employees

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.

Get expert advice on statutory maternity pay with Croner

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 470 2755.