NI17A - A guide to Maternity Benefits
Statutory Maternity Pay (SMP)
To qualify for SMP, you have to satisfy two basic rules:
- the continuous employment rule and
- the earnings rule
There are also other things you must do to qualify:
- you must tell your employer when you want your SMP to start and
- provide medical evidence of the date your baby is due
The continuous employment rule
To qualify for SMP, you must satisfy the continuous employment rule.
You must have been employed by your employer for a continuous period of at least 26 weeks into the qualifying week (which is the 15th week before the week in which the baby is due). This period must include at least one day's employment in the qualifying week.
Although continuous employment usually means employment by the same employer without a break, there are some circumstances when breaks in employment can be disregarded (see below). The employment rule may be modified slightly if your baby is born prematurely.
- Premature births
When broken employment can be taken as continuous
Continuous employment usually means employment by the same employer without a break, but it does not always mean this. There are circumstances when a change of employer can be disregarded. And under some circumstances, your employment can be treated as continuous in spite of some breaks.
For SMP purposes, your employment can be taken as continuous if any one of the following applies:
- you are absent (for periods of 26 consecutive weeks or less) because of sickness, injury, pregnancy or childbirth or
- you have taken a period of statutory maternity leave, adoption leave, paternity leave or parental leave (in which case, that period counts towards your period of continuous employment) or
- you did not take maternity leave but you were not working because you had a break to give birth; you worked for your employer before and after the break, and the break is not more than 26 weeks or
- your work has temporarily ceased because your employer was unable to offer you any work or
- you are away in circumstances in which, by arrangement or custom, your employment is regarded as continuing for some purposes (for example, if you are a teacher employed on term-by-term contracts with the same or associated employers) or
- you were unfairly dismissed and, after action under the Employment Rights Act 1996, were reinstated (or would have been, but for your pregnancy) and have refunded any redundancy or equivalent payment you received from your employer when you were dismissed or
- you were reinstated or re-engaged after following the dispute resolution procedure under Employment Act 2002 or
- you are away because of a stoppage of work during an industrial dispute. A strike does not break continuity of employment, but the weeks or part weeks of a strike do not count towards your 26 weeks of employment or
- after a spell in the Armed Forces, you return to your previous employer under the Reserve Forces (Safeguard of Employment) legislation within 6 months of your service ending. In this case your previous period with your employer can be treated as continuous together with your present one, but not the period of the break.
If you are employed by an agency
If you are employed by an agency, in each of the 26 weeks into the qualifying week, you will satisfy the continuous employment rule.
As long as you did some work during any week it counts as a full week.
There may be complete weeks when you did no work for the agency. This does not necessarily mean that your continuity of employment is broken.
Deciding the continuous employment question - If the agency was unable to offer you work in any particular week, continuity is not broken.
If the agency did offer work, but you were not available, the period of absence can count only if you were unable to work because of sickness, injury or pregnancy or parental, paternity or adoption leave.
- the agency had no work for you in that week and
- you were not intending to start your maternity leave at that time, and remained available for work after the QW as soon as the agency had something for you and
- you did in fact have further employment with the agency before starting your maternity leave
If you had intended to go on working but stopped before the QW because of sickness, you can be regarded as working into the QW. You must actually resume work with the agency within 26 weeks of stopping before this can apply. If you have stopped looking for work through a particular agency before the start of the QW, you are not entitled to SMP from that agency. But you may be entitled to claim Maternity Allowance from Jobcentre Plus.
If you stop work before the qualifying week
You will not normally qualify for SMP if your employment ends before the qualifying week. This is the 15th week before the week in which your baby is due.
However, if your baby is born prematurely before the QW you will be taken as satisfying the continuous employment rule if you would have been continuously employed but for early childbirth.
If you stop work during or after the qualifying week
If your employment ends during or after the qualifying week you can still qualify for SMP from your former employer.
Change of employer
If you change jobs during your pregnancy, you are unlikely to be able to meet the continuous employment rule.
But there are circumstances when your employment can be treated as continuous, even if your employer changes. For SMP purposes, your employment is treated as continuous if any of the following applies:
- your employer’s trade, business, or undertaking is transferred to another employer or
- by or under an Act of Parliament, one corporate body takes over from another as your employer or
- there is a change in the partners, personal representative or trustees who employ you or
- you move from one employer to another at a time when the two employers are associated employers, that is if one is a company of which the other (directly or indirectly) has control, or if both are companies of which a third person (directly or indirectly) has control or
- you are a teacher in a school maintained by a local education authority, and you move to another school maintained by the same authority.
The earnings rule
To qualify for SMP, you must also satisfy the earnings rule. Your average gross weekly earnings must be at least equal to the lower earnings limit for National Insurance (NI) purposes. The lower earnings limit is the point at which you start to be treated as if you have paid NI contributions. You will not actually have to pay NI contributions until your earnings reach a higher point called the primary earnings threshold.
The lower earnings limit is reviewed regularly, usually in April. If it changes while you are pregnant, remember that the lower earnings limit that applies to you will be the one that was current on the Saturday at the end of your qualifying week. The lower earnings limit is £107 a week for the tax year 2012/13 and £109 a week for the tax year 2013/14.
Working out your average weekly earnings
Your employer must work out your average weekly earnings to find out whether or not you qualify for SMP and, if so, at what rate. As a general rule, your earnings will be averaged over a period of at least 8 weeks up to and including the last pay day before the end of the qualifying week. This period is called the 'relevant period'. But the calculation may differ from this, depending on your pay period.
For SMP purposes, pay means gross pay that is due before any deductions. The gross pay you get from your employer in the relevant period will be taken into account, as long as it counts for NI contributions (or would count if you earned enough or were old enough to pay NI contributions).
Sick pay, overtime, bonus payments, arrears of pay and even, in most circumstances, holiday pay, must all be included if you actually get them at this time. It is when you get the money that counts, not when it was earned.
Average earnings should include all earnings and contractual benefits on which you pay National Insurance contributions, except Class 1B contributions which arise from a PAYE tax settlement agreement which your employer makes with HM Revenue and Customs. However, if you fail to qualify for SMP because some of your earnings are accounted for under the PAYE settlement agreement, your employer should recalculate your gross pay to include the elements giving rise to Class 1B National Insurance contributions.
If you are a student in receipt of a bursary, your bursary is not treated as earnings for SMP purposes.
Salary sacrifice is a contractual arrangement where an employee voluntarily gives up the right to some of their earnings in return for some form of benefit from their employer e.g. childcare vouchers.
Where a salary sacrifice arrangement is in place during the period used to work out your SMP, the SMP average weekly earnings calculation will be based on your contractual earnings which count for National Insurance contributions. Under the arrangement, the salary or wages will be paid at a reduced level and any other benefits subject to National Insurance may also change. This will reduce the amount of SMP paid to you or may mean that you will not be entitled to SMP as your earnings are too low.
If your employer awards a pay rise that is effective at any time from the start of the period used to calculate your SMP (the relevant period) and the end of your maternity leave, your employer must re-calculate your SMP. Your employer must also re-calculate SMP if you are awarded a pay rise with an effective date before the start of the set period but the earnings used in the SMP calculation did not reflect that pay rise.
The end of the maternity leave means the end of any ordinary or additional maternity leave you take.
In this example the woman is due a pay increase on 1 July each year and is entitled to SMP. Her maternity leave is 6 February 2013 to 4 February 2014. The beginning of the relevant period for calculating SMP is likely to have been around 28 October 2012.
The employer in this case must re-calculate SMP to take account of the pay rise due from 1 July 2013 because the effective date of the pay rise fell in the period 28 October 2012 to 4 February 2014.
In this example the woman is due a pay increase on 1 July each year and is entitled to SMP. Her maternity leave is 1 August 2013 to 31 July 2014. The beginning of the relevant period for calculating SMP is likely to have been around 21 April 2013.
The employer must re-calculate SMP to take account of the pay rise due from 1 July 2013, and because the woman is still on maternity leave on 1 July 2014, the employer must re-calculate her SMP for the second time. This is because the effective date of the pay rises fell in the period 21 April 2013 to 31 July 2014.
If in this example the woman decides to return to work early and end her maternity leave on 5 May 2014, then it is only the 1 July 2013 pay rise that will affect her SMP.
If you are paid weekly
Your employer will usually add together all your gross weekly earnings in the 8 weeks up to and including the last pay day before the end of your qualifying week. The total will then be divided by 8 to give your average weekly earnings.
NOTE: If a normal payment has been paid early, for example, before a holiday, the payments in the 8 week period should be divided by the number of weeks they cover.
If you are paid monthly
All the pay you get in the 2 months up to and including the last normal pay day before the end of the qualifying week will count. If you are paid once each calendar month, for example on the last working day of the month or on the same date each month, your employer will usually add together all the pay you received in these 2 months, divide by 2, multiply by 12 and then divide by 52 to give your average weekly earnings.
If you are paid monthly but are paid in multiples of a week (for example, on the last Friday of each month), your employer will usually add together all the pay you received in these 2 months and divide the total by the number of weeks covered by the payments to give your average weekly earnings.
If you are paid at other intervals
Your employer must add together your pay on your last normal pay day before the end of the qualifying week and any other pay received since (but not including) the last pay day to fall at least 8 weeks before that one. Your pay for this period is then averaged out, any odd days being counted as one-seventh of a week each.
For example, if your qualifying week ends on Saturday 16 March 2013, you were paid on Monday 11 February 2013, Thursday 27 December 2012 and Tuesday 18 September 2012.
This means that the last pay day before the end of the qualifying week is 11 February 2013. The last payday to fall at least 8 weeks before 11 February 2013 is 18 September 2012. Therefore the period used to average your payments is from 19 September 2012 to 11 February 2013 inclusive (the relevant period). The payments made to you on 27 December 2012 and 13 February 2013 are averaged over that period by counting the number of days in the relevant period. There are 146 days in this period, so to get a weekly average the sum of these earnings is divided by 146 and multiplied by 7.
See the diagram above.
If you are in any doubt, get your employer to show you how your average weekly earnings have been worked out.
If your baby is born prematurely before the end of the qualifying week, the relevant period for working out your average earnings will usually be the 8 weeks ending with the Saturday before the week in which your baby is born.
If you are dissatisfied with the way your SMP has been calculated talk to your employer to see if you can resolve the matter. If you are still unsure contact the HM Revenue and Customs employee helpline on 0845 30 21 479 for help in working out what SMP you should get. If you still disagree with your employer’s decision, the employee helpline will advise you on what you should do next.
If your contract ends
If you satisfy both the continuous employment rule and the earnings rule, your employer must pay you SMP even if your contract ends at any time after the start of the 15th week before the week your baby is due.
If you are taken into custody
If you are taken into legal custody at any time in your maternity pay period (MPP), your employer no longer has to pay you SMP. Your SMP will stop from the week in which you go into legal custody. Your employer will give you a form SMP1 to explain why. Legal custody means being detained by the police, usually arrested and/or in prison. Your entitlement to SMP is not affected if you voluntarily help the police with their enquiries.
When you are discharged from custody, you still will not be able to get SMP. But you may be able to get Maternity Allowance from Jobcentre Plus.
If you go abroad
Your employer can pay SMP to you anywhere in the world. If you work outside the European Economic Area (EEA), you may get SMP if your employer is liable to pay the employer's share of Class 1 NI contributions throughout the 26 week employment period.