What is Statutory Maternity Pay, and how can employers manage it effectively?

A new baby is a significant life event for any employee. For HR, finance, and business leaders, it triggers a crucial set of legal and financial responsibilities. At the heart of this is Statutory Maternity Pay (SMP).

Understanding statutory maternity pay is not merely a compliance issue. It’s fundamental to supporting your people, effectively managing your payroll, and maintaining a healthy cash flow.

For growing businesses, navigating the complexities of maternity leave and pay can seem daunting. The rules on eligibility, payment rates, and reclaiming costs from HMRC are detailed, and also can change according to new legislation. Getting it wrong can lead to legal challenges, poor employee relations, and financial penalties.

This guide provides comprehensive information to help you manage SMP correctly, efficiently, and with confidence.

What is the difference between Statutory Maternity Leave and Pay?

It’s vital to understand the difference between leave and pay. They are not the same thing, and employees can be entitled to one but not the other.

Statutory Maternity Leave (SML) is the time an employee is allowed to take off work. All female employees are entitled to 52 weeks of maternity leave, regardless of how long they have worked for you, or how much they earn. This is a day-one right enshrined in employment law. The 52 weeks are split into 26 weeks of ‘Ordinary Maternity Leave’ and 26 weeks of ‘Additional Maternity Leave’.

Statutory Maternity Pay (SMP) is the money an employer pays to an employee during their maternity leave. This is not a day-one right. It has strict qualifying conditions, and is only provided for 39 of the 52 weeks.

An employee who has been with you for four months, for example, is entitled to take the full 52 weeks off, but she will not be able to claim SMP.

Who is eligible to claim Statutory Maternity Pay?

To qualify, an employee must meet two key conditions, the continuous employment rule, and the earnings rule. And as the employer, it is your responsibility to verify these are met.

What is the continuous employment rule?

An employee must have been employed by you continuously for at least 26 weeks up to and including the ‘qualifying week’. This is the 15th week before the expected birth week.

This means you need to count back from that 15th week. The employee must have started employment with you on or before a date that gives them 26 weeks of prior service. And this period must include at least one day of work in the qualifying week.

What is the earnings rule?

In the ‘relevant period’ (usually the 8 weeks leading up to the qualifying week), the employee’s Average Weekly Earnings (AWE) must be at least equal to the Lower Earnings Limit (LEL). This is a crucial calculation, and understanding how to calculate weekly pay correctly is, in fact, foundational for all statutory payments.

LEL is the amount an employee must earn to qualify for certain state benefits and is the threshold where they start making National Insurance payments (even if they pay at a 0% rate).

If an employee’s average income is below this threshold, they will not qualify for SMP.

What happens if an employee is not eligible?

If you find that your employee does not qualify, you cannot simply tell them so without giving them any explanation. Instead, you must provide them with an SMP1 form within 7 days of making the decision. This form will explain precisely why they are not eligible.

The employee can then use this form to ask the government for Maternity Allowance (MA). This is a separate allowance paid directly by Jobcentre Plus, not by you, and will ensure the new parent still gets financial help, even if they don’t meet the SMP criteria.

How much is Statutory Maternity Pay and for how long is it paid?

Once you’ve confirmed an employee qualifies, the next step is calculating their pay. SMP is provided for a maximum of 39 weeks. However, the amount they get changes during this period.

How much is paid in the first 6 weeks?

For the first 6 weeks off, the employee receives 90% of their AWE. There is no upper cap on this amount. You must calculate their AWE from the ‘relevant period’ you used for the eligibility test.

How much is paid in the following 33 weeks?

For the remaining 33 weeks, the employee is entitled to the standard government-set weekly rate, or 90% of their AWE, whichever is lower.

The government reviews the rate each April. For the 2025/26 tax year, this rate is £187.18 per week. Conversely, if 90% of your employee’s AWE is less than this (for example, if they work part-time), you would continue to pay them the 90% amount instead.

What is the ‘Alabaster ruling’ and how can it affect SMP?

The Alabaster ruling means you must recalculate an employee's SMP if they get a pay rise at any time between the start of the ‘relevant period’ (used to calculate their SMP) and the end of their entire maternity leave. You must therefore recalculate their Average Weekly Earnings (AWE) using the new, higher pay rate, and then apply it retroactively as follows:

• For the first 6 weeks: Their 90% pay must be based on the new, higher AWE, and you must pay them any arrears.

• For the following 33 weeks: If their pay was 90% of AWE (because it was lower than the standard rate), this must also be recalculated and adjusted.

This applies to both individual and company-wide pay rises, and failing to recalculate can lead to legal challenges down the road.

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How do employers process and pay SMP?

Managing the administrative side of maternity pay is a key function for HR and finance teams.

What information does an employee need to provide?

To claim SMP, the employee must give you correct and timely information:

1. Notice: They must tell you they want to stop work to have a baby at least 15 weeks before the due date. They must also tell you when they want their leave and SMP to start. This date can be no earlier than the 11th week before the expected week of childbirth. If they change their mind about the start date, they usually need to give you 28 days’ notice.

2. Proof of pregnancy: They must give you a MAT B1 certificate. This is a form they get from their midwife or doctor, usually around 20 weeks into the pregnancy. It confirms their expected due date. You cannot make SMP payments without this.

If the baby is born early, or the expectant mother is off for a pregnancy-related illness in the 4 weeks before their due date, the leave starts immediately.

How are SMP payments managed through payroll?

SMP is paid to the employee on their normal payday (e.g. weekly or monthly), and processed through your payroll system, just like their regular salary.

Crucially, SMP is treated as income. This means it is subject to all normal deductions, including PAYE tax and employee National Insurance. Employer NI contributions are also due on the SMP payment.

Running these payments correctly alongside normal salaries is a core function of your payroll. This is why many growing businesses find that using an automated payroll system is essential for accuracy and compliance.

How can businesses reclaim SMP payments from HMRC?

This is the most critical part for finance managers. You are not expected to bear the full cost of SMP. You are, in effect, administering the payment on behalf of the government. This means that you can reclaim the money from HMRC.

How much is the standard SMP recovery amount?

Most employers can reclaim 92% of the SMP they pay. This recovery is done by reducing the PAYE and National Insurance bill you pay each month. Your payroll software should calculate this amount for you, which you will then report on your Employer Payment Summary (EPS) submission.

What is the Small Employers’ Relief?

If your business qualifies as a ‘small employer’, you can reclaim 103% of the SMP. This means you actually get back more than you pay out, as a small credit to help with administrative costs.

You qualify for Small Employers’ Relief if your total Class 1 National Insurance contributions (both employer and employee) in the previous tax year were £45,000 or less. This is a significant benefit for many small and growing businesses.

What is Advance Funding?

If paying the SMP upfront would cause your business cash flow problems, you can apply to HMRC for ‘Advance Funding’, via the GOV.UK website.

What other rights and considerations should managers know?

SMP is just one aspect of an employee’s maternity. There are other important considerations to handle as an employer, such as KIT days, contractual schemes, and pensions. Some of these fall under UK employment law, which also governs Paternity Leave and Shared Parental Leave.

What are Keeping in Touch (KIT) days?

KIT days, or ‘Keeping in Touch’ days, are when your employee is allowed to work for you for up to 10 days during their maternity leave without losing their SMP for that week.

KIT days are optional and must be agreed upon by both you and the employee. As the ACAS guidance on maternity leave clarifies, neither party can insist on them. So, you must mutually agree on what working arrangements will apply and how much will be paid for them. This pay is considered separate from their SMP.

There are also SPLIT days, or Shared Parental Leave In Touch days. The difference between KIT and SPLIT is that the latter applies specifically to those on Shared Parental Leave.

What is enhanced or contractual maternity pay?

As a business, you may choose to offer enhanced or contractual maternity pay. This is a company benefit where you pay more than the legal minimum (e.g. full pay for 3 months).

This is a powerful tool for attracting and retaining talent, and it’s worth considering as part of your wider employee benefits strategy.

However, the terms must be clearly stated in the employment contract, and the policy must be administered fairly. Managing different pay schemes is a task where a flexible benefits platform and an all-in-one HR software solution can be invaluable.

Are pension contributions paid during maternity leave?

During the paid part of maternity leave (the 39 weeks of SMP), your employer pension contributions must continue. These contributions must be based on the employee’s normal, pre-leave salary, not on the lower SMP rate.

The employee’s contributions, however, are based on the actual SMP they are receiving. During the unpaid part of their leave, neither of you has to contribute.

How can payroll software simplify maternity pay management?

For a growing business, manual SMP management can put you at significant risk of calculation and compliance errors. Calculating AWE, especially for employees with variable pay, is complex. And forgetting to issue an SMP1 form or miscalculating the 92% reclaim can cause legal and financial headaches. What’s more, the administrative burden on HR and finance teams is high.

On the other hand, modern payroll software automates this entire process, in order to:

• Automatically calculate eligibility and the correct AWE.

• Apply the correct 6-week and 33-week rates.

• Accurately deduct tax and NI.

• Generate the correct figures for your EPS submission, to ensure you reclaim the right amount.

• Provide a clear audit trail for all payments.

This frees up your team to focus on strategic tasks, like coordinating and supporting the new parent’s return to work, rather than dealing with the mind-numbing number-crunching.

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