Frequently asked questions about........SMP (Statutory Maternity Pay)

How much is SMP?
SMP is paid as a weekly rate for a maximum of 39 weeks. The rates are as follows:

• 90% of an employee’s average weekly earnings (before tax) for the first 6 weeks.
• The rate for the remaining 33 weeks is set by HMRC each tax year. For the 2019/20 tax year, the weekly rate is £148.68. If however, 90% of the employee’s average weekly earnings is lower than this then the rate will be the lower amount.

What is the eligibility criteria for SMP?
To qualify for SMP an employee must:

• Earn on average at least £118 a week (for 2019/20 tax year).
• Give the correct notice: at least 15 weeks before the due date, tell the employer when the baby is due and when they want to start maternity leave.
• Give proof that they’re pregnant (MATB1 certificate) within 21 days of your SMP start date.
• Have worked for the employer continuously for at least 26 weeks continuing into the 15th week before the expected week of childbirth. This is known as the “qualifying week”

If an employee is not eligible for SMP, the employer must give the employee form SMP1 explaining why the employee cannot get SMP. This must be done within 7 days of making the decision. The employee may be eligible for Maternity Allowance instead.

Can an employer reclaim SMP from HMRC?
All employers can reclaim SMP from HMRC. This is done by offsetting the SMP amount against the PAYE bill. If the PAYE bill is less than the SMP amount, the employer’s PAYE account will be in credit. If an employer’s total gross Class 1 National Insurance bill is £45,000 or less in the last tax year, they are entitled to reclaim 100% of the SMP amount plus 3% compensation. Otherwise, the rate is 92% of the SMP amount.

What can an employer do if they cannot afford to pay SMP?
For some small employers, having a key employee go on maternity leave and getting someone for maternity cover can prove to be a strain on cash flow. An employer can apply to HMRC to receive SMP funding in advance of payments being made to the employee. For detailed guidance on how this works, please get in touch.

Can an employer make deductions from SMP payments?
An employer is entitled to make authorised deductions from SMP (e.g. pension contributions, trade union membership). However, an employer cannot deduct the value of childcare vouchers from SMP. This was established in the Peninsula Business Services Ltd v Donaldson case whereby the Employment Appeal Tribunal ruled that it is not discriminatory for an employer to discontinue childcare vouchers during maternity leave. The Employment Appeal Tribunal decided that as childcare vouchers are normally provided by salary-sacrifice they form part of an employee’s pay and an employee is not entitled to them during maternity leave.

Does an employer have to pay pension contributions during maternity leave?
During the first 26 weeks of maternity leave (also called Ordinary Maternity Leave “OML”) an employer must continue to pay full pension contributions based on normal pay, whether or not the employee plans to return to work afterwards. This applies whether the employee is being paid maternity pay (SMP or Contractual) or Maternity Allowance or neither. Employee contributions however will be based on the payment actually received.
Practical Note: It is also worth checking with your pension provider what they expect with regards to employer contributions during the paid maternity leave period. Some pension providers expect payment of contributions to be based on the amount actually being paid to the employee.

What happens to salary sacrifice schemes during maternity leave?
If an employee is in a scheme where she gives up part of her salary for non-cash benefits, an employer should seek legal advice if unsure on what should happen to those benefits while the employee is on maternity leave. Please get in touch if you would like specific guidance in this area.

What happens to allowances which are paid as part of remuneration (e.g. car allowance)?
An employee is not entitled to ‘remuneration’ during maternity leave. The law defines ‘remuneration’ as including payments of wages or salary. This means that since an employee is not entitled to basic pay, potentially they are not entitled to any other financial payments that they regularly receive from their employer as part of a salary package. The law is not clear about what other financial payments an employee can expect to receive. Therefore, it is advisable to seek advice if you are unsure whether a particular payment is part of an employee’s normal salary, or whether it is an extra payment.

What happens to bonuses and commission during maternity leave?
There have been many tribunal cases on the issue of bonuses and commissions highlighting the fact that this is a complicated area. At present the general position is that bonus or commission payments that are part of salary or regular earnings or performance-related pay are likely to be regarded as remuneration and therefore are not payable during maternity leave. To avoid any ambiguity, employers should make sure that their maternity policy include details about payments during maternity leave.

What happens to contractual benefits during maternity leave?
Benefits such as a company car, mobile phone, lunch vouchers, club membership, health and other insurance continue as normal during maternity leave. An employee is entitled to keep a company car or mobile phone provided for personal use by the employer throughout the maternity leave period. Also, participation in share schemes, professional subscriptions, free or subsidised travel, and subsidised childcare should continue during maternity leave.