Understanding the Importance of Statutory Maternity Pay
Statutory Maternity Pay (SMP) is a legal financial entitlement that provides eligible pregnant employees in the UK with a baseline income during their time away from work before and after having a baby. It is not a government benefit paid directly to the individual; it is administered through the employer’s payroll and treated as earnings, subject to tax and National Insurance in the normal way. SMP is paid for a maximum of 39 weeks, structured as 90% of average weekly earnings for the first six weeks, followed by either £184.03 per week or 90% of average weekly earnings for the remaining 33 weeks, whichever is lower. Employers who pay SMP can reclaim the majority of the cost from HMRC, and small employers may reclaim more than they paid out. For employees, understanding eligibility, calculation, and the notice process is essential for financial planning. For employers and payroll professionals, knowing the rules around SMP is a core compliance requirement.
A Practical Guide to Statutory Maternity Pay
For most employees, maternity pay is something they encounter only once or twice in their working lives, often with limited prior knowledge of how it works. The terminology can feel unfamiliar, the calculation involves specific reference periods that differ from standard payroll, and the interaction between SMP, Maternity Allowance, and enhanced contractual pay creates additional complexity.
This guide works through each element in sequence, covering eligibility, calculation, the application process, employer obligations, and what happens in less straightforward situations such as early births, pay rises, and employer disputes.
How Much SMP Is Paid and for How Long
SMP is paid for 39 weeks across two distinct periods.
During the first six weeks, the payment is 90% of the employee’s average weekly earnings, calculated using a specific reference period. There is no upper cap on this amount. An employee whose average weekly earnings are £1,000 receives £900 per week during this phase.
For the following 33 weeks, the payment is either the standard weekly rate of £184.03 or 90% of average weekly earnings, whichever is lower. An employee whose 90% figure falls below £184.03 will receive 90% of their earnings throughout. An employee whose 90% figure exceeds £184.03 will receive the capped rate for the remaining weeks.
SMP is paid for 39 weeks in total. Employees in the UK are entitled to take up to 52 weeks of Statutory Maternity Leave; the final 13 weeks, if taken, are unpaid. The minimum compulsory maternity leave is two weeks immediately following the birth, or four weeks for factory workers.
The standard weekly rate is reviewed annually, typically each April, in line with changes to the cost of living.
Eligibility
To qualify for SMP, an employee must meet four conditions simultaneously.
Employment status is the first. The individual must be an employee with a contract of employment, paid through PAYE. Freelancers, agency workers paid directly by clients, and self-employed individuals do not qualify for SMP, though they may be eligible for Maternity Allowance, which is discussed later in this guide.
Earnings must meet the minimum threshold. The employee’s average weekly earnings during the relevant calculation period must be at or above the Lower Earnings Limit for National Insurance, currently £123 per week. Part-time workers are subject to the same threshold; there is no separate rule for part-time employment.
Continuous employment is the third condition. The employee must have worked for the same employer without a break in their contract for at least 26 weeks, measured up to and including the qualifying week.
Proof of pregnancy must be provided. Employees are required to give their employer a MATB1 certificate, issued by a midwife or doctor, typically around the 20-week scan. This is the standard form of medical evidence used to confirm the pregnancy and expected due date.
The Qualifying Week
The qualifying week is the 15th week before the expected week of childbirth. To identify it, locate the expected week of childbirth on a calendar and count back 15 weeks. The employee must have completed 26 weeks of continuous employment with their employer by the end of this week to be eligible for SMP.
The qualifying week also marks the deadline for the employee’s notice of intention to take maternity leave, as set out in the following section.
The Notice Process
Employees must formally notify their employer of their pregnancy, their expected due date, and their intended maternity leave start date at least 15 weeks before the expected week of childbirth. This notice can be given in writing or verbally, though written notice is advisable to create a clear record. The employee is permitted to change their intended start date, provided at least 28 days’ notice of the revised date is given.
The MATB1 certificate should be provided to the employer at the same time as, or shortly after, the 15-week notice. The formal deadline for submitting it is no later than 21 days after the maternity pay period begins, but submitting it promptly with the initial notice ensures the payroll team has sufficient time to process the claim without payment delays.
Calculating Average Weekly Earnings
SMP is calculated using the employee’s average weekly earnings during a specific reference window called the relevant period. This is not a straightforward annual average; it is a defined eight-week window that ends on the last normal payday on or before the Saturday of the qualifying week.
The calculation includes all gross earnings paid during those eight weeks, including basic salary, overtime, bonuses, commission, and any sick pay received in that period. A bonus paid within the relevant period will increase the average weekly earnings figure and therefore increase the 90% payment for the first six weeks of SMP, even if that bonus is not representative of normal pay.
Conversely, unpaid leave within the relevant period reduces the average, and if the reduction is significant, it could cause the employee’s average to fall below the £123 weekly Lower Earnings Limit, affecting eligibility.
Employees participating in salary sacrifice schemes should be aware that salary sacrifice reduces gross taxable pay, which in turn reduces the average weekly earnings figure used to calculate SMP. Some employees choose to temporarily pause salary sacrifice arrangements before the relevant period to avoid this reduction in their SMP calculation. Any decision to do so should be made with sufficient notice to the employer and an understanding of the impact on other scheme benefits.
If the Employee Leaves Their Job
Leaving employment after the start of the qualifying week does not extinguish the right to SMP. An employee who resigns, is dismissed, or is made redundant on or after the start of the qualifying week retains their full entitlement to 39 weeks of SMP. The former employer remains legally obligated to pay it through their payroll and continues to reclaim the cost from HMRC in the normal way.
If the employee leaves, is dismissed, or is made redundant before the qualifying week, the entitlement to SMP is lost. In that situation, the individual may be eligible for Maternity Allowance instead.
SMP and Maternity Allowance
Maternity Allowance (MA) is a government benefit administered by the Department for Work and Pensions. It applies to individuals who do not qualify for SMP, including the self-employed, those who have not been with their current employer long enough to meet the 26-week rule, and those who left their job before the qualifying week.
The eligibility criteria for MA are different from those for SMP. MA considers employment or self-employment activity in the 66-week period before the expected week of childbirth, requiring the individual to have been employed or self-employed for at least 26 of those weeks and to have earned an average of £30 or more per week in any 13 of those weeks.
The payment structure also differs. While SMP provides 90% of earnings with no cap for the first six weeks, Maternity Allowance is capped from the outset at either £184.03 per week or 90% of average earnings, whichever is lower, for the full 39 weeks. For higher earners who miss out on SMP due to a recent job change, this difference in the first six weeks can be financially significant.
Enhanced Contractual Maternity Pay
Many employers offer maternity pay packages that exceed the statutory minimum. These enhanced or occupational schemes are entirely at the employer’s discretion and will be set out in the employment contract or staff handbook. Common structures include a period of full pay followed by a period at the statutory rate, or a combination of the two.
Where enhanced pay is offered, a clawback clause is frequently attached. This requires the employee to repay the enhanced element of the maternity pay if they do not return to work after leave, or if they return but leave within a specified period. The statutory element of the payment can never be subject to clawback; only the additional amount above the legal minimum may be reclaimed by the employer.
Employees considering enhanced maternity pay arrangements should check their contract carefully for the terms of any clawback clause before making decisions about their return to work.
Employer Obligations
Once an eligible employee has met the notice requirements and provided the MATB1, the employer has a legal obligation to pay SMP through the payroll system for the qualifying period. They must provide the employee with a written statement setting out the amount and timing of SMP payments.
Employers reclaim SMP paid to employees from HMRC through the Employer Payment Summary submitted as part of the Real Time Information process. Standard employers can reclaim 92% of the SMP paid. Employers who qualify for Small Employers’ Relief, those whose total Class 1 National Insurance liability in the previous tax year was £45,000 or less, can reclaim 103% of the SMP paid, covering the full cost plus a 3% contribution toward administrative costs.
Employment rights continue throughout the maternity leave period. Annual leave continues to accrue at the normal rate. The employee remains entitled to benefit from any general pay rises awarded during the leave period. Employer pension contributions must continue based on the employee’s normal salary, while employee contributions are calculated on the actual SMP received.
Keeping in Touch Days Keeping in Touch Days
During the maternity leave period, both the employee and the employer may agree that the employee may work up to 10 Keeping in Touch days. These are entirely voluntary for both parties and do not end maternity leave or SMP. The employee must be paid for any KIT day worked, at a rate agreed with the employer in advance. Working a KIT day does not reduce the 39-week SMP entitlement.
Pay Rises During Maternity Leave or the Relevant Period Pay Rises During Maternity Leave or the Relevant Period
If an employee is awarded a pay rise at any point between the start of the eight-week relevant period and the end of their maternity leave, the employer is required to recalculate SMP as if the pay rise had been in effect throughout the relevant period. This is known as the Alabaster principle, following a European Court of Justice ruling. Any underpayment resulting from the recalculation must be paid to the employee as a backdated lump sum. This ensures employees on maternity leave are not disadvantaged by their absence when pay increases are applied.
Early and Premature Births
If a baby arrives before the planned maternity leave start date, the maternity leave and SMP period begin automatically the day after the birth. If the birth occurs before the qualifying week, the employee may still be entitled to SMP provided they would have met the 26-week continuous employment condition had the baby been born on their due date. The relevant period for calculating average weekly earnings shifts accordingly.
In the event of a stillbirth after 24 weeks of pregnancy, or where a baby is born alive at any stage but does not survive, the employee retains full entitlement to 52 weeks of maternity leave and 39 weeks of SMP. This provision ensures the employee has adequate time to recover and is not required to return to work under financial pressure during an exceptionally difficult period.
Tax and National Insurance
SMP is treated as earnings for tax purposes. Income tax is deducted in the normal way where earnings exceed the personal allowance threshold. For most employees, the significant reduction in income during maternity leave, particularly after the first six weeks, will bring their total annual earnings close to or below the personal allowance, potentially resulting in a tax rebate at the end of the year.
The standard SMP rate of £184.03 per week falls below the primary National Insurance threshold. Employees receiving SMP at this rate will not pay National Insurance contributions during that period but will receive NI credits, which protect their future entitlement to the state pension.
Resolving Disputes
If an employer refuses to pay SMP or calculates it incorrectly, they must provide the employee with Form SMP1 within seven days, stating the reason for the refusal or the basis for the calculation. The employee needs this form to claim Maternity Allowance as an alternative if they are found ineligible for SMP.
Where the employee believes the refusal or calculation is incorrect, the HMRC Statutory Payment Dispute Team can be contacted to investigate. HMRC will review the payroll records and, if the employee is found to be entitled, can require the employer to make the payment. In cases of employer non-compliance, HMRC can take over the payment directly.
Organisations including Maternity Action, Acas, and Citizens Advice provide free guidance for employees navigating maternity pay disputes.
Planning Around SMP
Knowing the payment structure in advance allows for straightforward financial planning. The income during the first six weeks is typically higher than the standard rate that follows, and the final weeks of leave may be unpaid if the employee takes the full 52 weeks of leave. Mapping out the expected monthly income across the leave period, accounting for tax deductions and the point at which the rate changes, gives a clear picture of the budget throughout.
Child Benefit is a separate payment available from the child’s birth. It is paid directly to the claimant and is not linked to employment status or earnings, though higher earners may be subject to the High Income Child Benefit Charge. Claiming it promptly provides an additional income stream during the leave period.
For employers, integrating SMP administration into standard payroll processes, including the calculation of average weekly earnings, the submission of reclaim figures through the EPS, and the management of KIT days and return-to-work arrangements, ensures compliance without disproportionate administrative burden.
IRIS Software Group
Award winning software and solutions for the businesses of the future
Discover why more than 100,000 customers across 135 countries trust IRIS Software Group to manage core business operations