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How employers can claim from HMRC for statutory maternity leave

As an employer, managing maternity leave is an inevitable part of doing business. You will be understandably thrilled for your employee, whilst also wondering whether your team will be overstretched, or how this change might hurt productivity. On top of that, you have the financial commitments surrounding UK statutory maternity pay (SMP) to navigate.  It can all end up feeling rather admin heavy.

How employers can claim from HMRC for statutory maternity leave

Thankfully, it is not the financial burden it initially appears to be, as you are able to recover your outlay related to SMP. Here Ercan Demiralay, Partner at Wellers, talks to us about the process of maternity leave and explores whether employers can claim back statutory pay.

Basics of Statutory Pay

Before looking at how to recoup some of your expenditure, it is certainly worth looking at SMP in more detail and understanding the legal requirements. Employees are entitled to up to 52 weeks of maternity leave, but employers only have to pay them for 39 weeks. That is the minimum obligation, however, as the employer, you can be more generous if you see fit.

In order for an employee to qualify for SMP, they must earn on average at least £118 a week, give correct notice, provide proof of pregnancy (if you need it) and have worked for you continuously for at least 26 weeks continuing into the ‘qualifying week’ – the 15th week before the expected week of childbirth.

SMP has to be paid at 90 percent of average weekly earnings before tax for the first six weeks. You will need a MATB1 form from the midwife, as this includes pertinent information regarding qualifying weeks and the amount to be settled. For the remainder, you have to pay either a flat rate of £148.68 a week or continue at 90 percent, whichever is less.

How to claim it back?

As an employer, if your organisation has paid less than £45,000 in class one national insurance contributions over the last tax year, then you can claim back the full SMP sum, as well as an additional three percent – this is to compensate for the secondary national insurance contributions that are payable on SMP. For those that are heading up bigger businesses, you are allowed to claim back 92 percent of the SMP you have paid out to HM Revenue & Customs (HMRC).

By using a qualified accountant or suitable payroll software, you will find that your claim can be calculated for you, and all the relevant paperwork put together for HMRC to process your refund.

If the payroll contains directors or employees, where PAYE payments are minimal each month, there will be little to no PAYE liability to offset against the SMP reclaim. You are permitted to claim the funding in full in advance of the maternity leave starting, with it being deposited into the business’ bank account within 10 days of the claim being made. For smaller businesses this is often a blessed relief, removing any worry overpayments or cashflow.

Paternity leave and pay

Whilst on the subject, it only seems right to mention other forms of leave that you will have to handle as an employer. Paternity leave is available to fathers from the birth of their child. It’s designed to offer them the opportunity to establish a relationship with their child, and of course, support the mother in the first few weeks after birth. Typically, fathers receive two weeks leave, paid at the minimum statutory rate, taken in one-week segments.

On top of this, you will also encounter shared parental leave, which can be taken by either, or, both parents. This approach allows mothers to transfer all but the first two weeks of maternity leave to their partner. However, fathers have no individual entitlement to parental leave, so the rate of pay is at your discretion.

In summary

Once you have come to terms with the fact that you will be losing a quality employee potentially for up to a year, and that your administrative load will be growing, there is plenty that can be done to help you out financially. Depending on where your organisation sits in terms of national insurance contributions, you will either be able to claim back the full amount, plus three percent, or 92 percent, which is still significant.

With the right processes and procedures in place, and by working with the right people, this administrative and financial weight can be lifted, leaving you to be happy for your employee and safe in the knowledge that your business will be financially sound in their absence.

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