Statutory Maternity Pay vs Maternity Allowance: A Guide for Small Businesses

As a small business owner, understanding the intricacies of employee benefits is essential. Two common forms of maternity benefits in the UK are Statutory Maternity Pay (SMP) and Maternity Allowance (MA). Knowing the differences between these benefits will help you support your employees and ensure compliance with HMRC regulations. This guide breaks down the key distinctions between SMP and MA, helping you navigate these important policies.

What is Statutory Maternity Pay (SMP)?

Statutory Maternity Pay (SMP) is a benefit paid to eligible employees by their employers. It’s designed to provide financial support to women who are taking time off work to have a baby.

Eligibility Criteria for SMP:

• The employee must have worked for you continuously for at least 26 weeks up to the 15th week before the expected week of childbirth (EWC).
• They must earn an average of at least £123 per week.
• The employee must provide you with sufficient notice of their maternity leave.

SMP Payment Structure:

• First 6 weeks: 90% of the employee’s average weekly earnings (AWE) before tax.
• Next 33 weeks: £184.03 per week or 90% of their AWE, whichever is lower.

SMP Duration:

• SMP can be paid for up to 39 weeks.

Employer’s Role:

• As an employer, you are responsible for paying SMP to your eligible employees.
• You can reclaim a percentage of SMP payments from HMRC (92% or 103% if you qualify for Small Employers’ Relief). For statutory maternity pay, the full amount is credited against the Employer PAYE Liabilities e.g. their tax and NI due.

What is Maternity Allowance (MA)?

Maternity Allowance (MA) is a benefit paid by the government to women who do not qualify for SMP. This might be because they are self-employed, recently changed jobs, or their earnings are too low.

Eligibility Criteria for MA:

• The individual must have been employed or self-employed for at least 26 weeks in the 66 weeks before the EWC.
• They must have earned at least £30 a week over any 13-week period within those 66 weeks.

MA Payment Structure:

• Standard Rate: £172.48 per week or 90% of their average weekly earnings, whichever is lower.
• Alternative Rates: There are different rates for women who do not qualify for the standard rate based on their employment status and earnings.

MA Duration:

• MA can be paid for up to 39 weeks.

Application Process:

• Employees need to apply for MA directly through Jobcentre Plus.
• They will need to provide proof of income and employment status.

Key Differences Between SMP and MA

Source of Payment:

• SMP: Paid by the employer, who can then reclaim a portion from HMRC.
• MA: Paid directly by the government to the individual.

Eligibility:

• SMP: Requires continuous employment with the same employer and a minimum earnings threshold.
• MA: More flexible, allowing for various forms of employment and lower earnings thresholds.

Administrative Process:

• SMP: Managed by the employer.
• MA: Managed by the government, with the employee handling the application process.

Distinguishing between Statutory Maternity Pay and Maternity Allowance is crucial for small business owners. By understanding these benefits, you can better support your employees and ensure compliance with HMRC guidelines. For further guidance and support, reach out to Helpbox. We’re here to help you navigate these important policies and keep your business running smoothly.