What Employers Need to Know About Paying Statutory Maternity Pay: Key Guidelines and Requirements

Understanding statutory maternity pay for employers is essential for managing payroll correctly and meeting your legal responsibilities. Statutory Maternity Pay (SMP) provides eligible employees with financial support during maternity leave, and employers must assess eligibility, calculate payments accurately and report them correctly through payroll.

For eligible employees, SMP can be paid for up to 39 weeks. The first six weeks are generally paid at 90% of the employee’s average weekly earnings, followed by up to 33 weeks at the applicable statutory rate or 90% of average weekly earnings if lower. As rates and earnings thresholds can change each tax year, employers should always check the current HMRC figures before processing payments.

This statutory maternity pay employer guide explains the core rules around eligibility, calculating SMP, employee rights, payroll reporting and how employers may reclaim statutory maternity pay from HMRC.

Eligibility Criteria for Statutory Maternity Pay

Before paying Statutory Maternity Pay, an employer must check whether the employee meets the relevant employment, earnings and notification conditions. Understanding statutory maternity pay eligibility for employers helps prevent payroll errors and ensures employees receive the correct support.

Determining the Qualifying Week

The qualifying week is normally the 15th week before the week in which the employee’s baby is due. To qualify for SMP, the employee must generally have been continuously employed by the same employer for at least 26 weeks up to and including the qualifying week and must still be employed by that employer during that week.

Employers should also confirm that the employee has provided the required notice and evidence of pregnancy within the applicable time limits. Keeping accurate employment and payroll records is important when assessing eligibility.

Assessing the Lower Earnings Limit

An employee’s average weekly earnings must normally be at least equal to the Lower Earnings Limit for National Insurance purposes to qualify for SMP. This threshold is reviewed periodically, so employers should use the current figure for the relevant tax year.

Average weekly earnings are calculated using the employee’s earnings during the relevant period. This may include qualifying payments such as salary and certain other earnings processed through payroll. Understanding the treatment of National Insurance contributions and payroll earnings can help employers maintain accurate records.

If an employee does not qualify for SMP, they may still be able to claim Maternity Allowance, depending on their circumstances. Employers should provide the appropriate information where SMP cannot be paid.

Calculating Statutory Maternity Pay

Correctly calculating SMP is one of the most important responsibilities for employers. The calculation is based on the employee’s average weekly earnings during the relevant period, and errors can lead to underpayments, overpayments and payroll corrections.

Understanding Average Weekly Earnings

Average Weekly Earnings (AWE) are used to determine both eligibility for SMP and the amount payable. Employers must identify the correct relevant period based on the employee’s normal pay schedule and calculate qualifying earnings accurately.

In simple terms, the process involves:

1. Identify qualifying earnings: Include relevant gross earnings paid during the correct calculation period.
2. Confirm the relevant period: Use the statutory rules that apply to the employee’s pay frequency.
3. Calculate the average: Divide the qualifying earnings by the number of weeks in the relevant period.

The first six weeks of SMP are generally paid at 90% of the employee’s average weekly earnings. For the remaining weeks of the SMP period, the employer pays the applicable statutory weekly rate or 90% of average weekly earnings, whichever is lower.

The Alabaster Calculation Method

The Alabaster principle can become relevant where an employee receives a pay rise that affects maternity-related statutory payments. Employers may need to reassess SMP in certain circumstances where a qualifying pay increase applies, including increases awarded after the relevant calculation period.

These situations can be more complex than a standard SMP calculation, particularly where there are backdated pay rises, irregular earnings or changes to payroll. Employers should ensure they apply the correct HMRC guidance and accurately calculate SMP where special circumstances affect the employee’s entitlement.

Rights and Responsibilities

Employers must understand both their payroll responsibilities and the wider employment rights connected with maternity. Proper handling of maternity rights helps businesses remain compliant and supports a positive working relationship with employees.

Maternity Rights and Employment Contract

Eligible employees can take up to 52 weeks of statutory maternity leave. SMP and maternity leave are separate entitlements, meaning an employee may be entitled to maternity leave even if they do not qualify for SMP.

Employers should review the employee’s contract because some businesses offer enhanced maternity benefits in addition to statutory requirements. Employees claiming SMP must normally provide appropriate notice and evidence of pregnancy, such as the MATB1 certificate. Further guidance for specific circumstances can be found through proof of pregnancy and maternity pay guidance.

Employers should also ensure that any additional maternity benefits included in the employment contract are administered correctly. Clear communication about leave dates, pay and return-to-work arrangements can reduce misunderstandings.

Returning to Work After Maternity Leave

Employees returning from maternity leave have statutory employment rights, and employers should manage their return carefully. Depending on the length and type of leave taken, an employee may have the right to return to the same job or, in certain circumstances, a suitable alternative role.

Pregnancy and maternity are protected under employment law. Employers should therefore handle workplace changes carefully and remain aware of protected characteristics and protections against discrimination.

Before the employee returns, it can be helpful to discuss practical arrangements, including any agreed flexible working requests or workplace changes. Good communication supports a smoother transition and helps employers meet their responsibilities.

HMRC Reporting and Reclaiming Statutory Maternity Pay

Employers must process SMP through their payroll and report the relevant information to HMRC. Understanding reporting to HMRC is important for maintaining accurate payroll records and recovering eligible statutory payments.

Completing the Employer Payment Summary

Employers report statutory payment recovery information to HMRC through the Employer Payment Summary (EPS), where required. The payroll process should accurately record the SMP paid and any amounts that the employer is entitled to recover.

• Accurate payroll records: Record the SMP paid during the relevant payroll period.
• Recovery calculations: Apply the appropriate HMRC recovery rules based on the employer’s circumstances.
• Corrections: Correct payroll reporting errors promptly to maintain accurate HMRC records.

Employers may be able to reclaim statutory maternity pay from HMRC, with the amount recoverable depending on the applicable statutory rules and the employer’s circumstances. If you are unsure how to process SMP or recovery correctly, review official guidance and seek professional payroll advice.

For current statutory rules and rates, employers can also refer to the GOV.UK website.

Exploring Maternity and Parental Grants

Employees who do not qualify for SMP may be entitled to other forms of financial support depending on their circumstances. Examples can include:

• Sure Start Maternity Grant: A qualifying one-off payment available in specific circumstances to help with the costs of having a child.
• Maternity Allowance: Financial support that may be available to individuals who do not qualify for SMP but meet the relevant eligibility conditions.

Employers should inform your employees appropriately when SMP cannot be paid and provide the necessary documentation or information required for them to explore alternative support.

Frequently Encountered Issues When Paying SMP

Employers can encounter problems when dealing with eligibility, average weekly earnings, payroll records and statutory payment recovery. Addressing these issues early can help avoid incorrect payments and unnecessary payroll corrections.

Discrepancies with National Insurance Contributions

Accurate payroll information is essential when calculating statutory payments. Errors in earnings records or payroll processing can affect the calculation of average weekly earnings and create difficulties when checking entitlement.

Employers should maintain accurate records and regularly review relevant employee information, including their NIC history. Payroll system changes or incorrect data entry can create discrepancies, so regular checks are advisable.

If an error is identified, it should be investigated and corrected as soon as possible to ensure payroll records and statutory payment calculations remain accurate.

CASE STUDY: Statutory Maternity Pay for Employers and Payroll Responsibilities

Priya, a small business owner, visited one of our Fulham Broadway offices after an employee notified her that she was pregnant and intended to begin maternity leave later in the year. Priya wanted to understand her statutory maternity pay for employers responsibilities, particularly how eligibility, payroll calculations and HMRC reporting worked.

We first reviewed the employee’s employment history and earnings. The employee had been continuously employed for more than 26 weeks by the qualifying week and met the relevant earnings requirement. We then explained how Average Weekly Earnings would be used to calculate SMP.

For example, if the employee’s Average Weekly Earnings were £600:

• First 6 weeks: 90% of £600 = £540 per week

• Remaining eligible SMP weeks: the applicable statutory rate or 90% of AWE, whichever is lower

Priya had initially assumed that maternity leave and SMP were the same entitlement. We clarified that an employee can have statutory maternity leave rights even where they do not qualify for SMP.

We also discussed the importance of processing payments correctly through payroll, maintaining supporting records and submitting the appropriate Employer Payment Summary where statutory payment recovery information must be reported to HMRC. We highlighted that payroll issues such as backdated pay rises may also require additional consideration under the Alabaster principle.

After the discussion, Priya understood that statutory maternity pay for employers involves more than simply paying an employee during leave. Eligibility checks, accurate AWE calculations, payroll reporting and HMRC recovery procedures all need to work together.