Maternity Pay
Most pregnant employees qualify for Statutory Maternity Pay (SMP) provided they have at least 26 weeks' continuous service with you (full or part-time) by the end of the 15th week before the Expected Week of Childbirth (EWC).
Women who don't may be able to claim Maternity Allowance. Employees can download a maternity allowance claim form from the Department for Work and Pensions (DWP) website (PDF).
In order to qualify for SMP employees must have average earnings which are no lower than the lower earnings limit which applies to National Insurance.
SMP is paid during maternity leave. You will also have to pay SMP if the employment contract ends after the start of the fifteenth week before the baby is due. It is payable at a rate of 90 per cent of her average weekly earnings for the first six weeks. A further 33 weeks are paid at the standard rate set by the government, which is £112.75 per week from 1 April 2007, or 90 per cent of the woman's average weekly earnings, whichever is lower.
You can recover 92 per cent of SMP payments but if your total National Insurance payments are £45,000 per year or less you can recover 104.5 per cent to cover SMP payments, and in compensation for some of the employers' National Insurance paid on SMP. You can recover SMP by deducting it from payments you make to HM Revenue & Customs (HMRC) for PAYE and National Insurance. You can also get funding in advance for payments of SMP from HMRC.
To help you to work out any SMP you have to pay your employee and how much of the cost you can recover, you can use the interactive SMP calculator on the HMRC website.