Minimum Wage and Statutory Pay Obligations

A rn through some of the key requirement small businesses need to be aware of when you employ staff

Minimum Wage and Statutory Pay Obligations

Maternity Pay

Many pregnant women on ordinary maternity leave are entitled to statutory maternity pay (SMP).

This is treated as income and is paid net of income tax and National Insurance contributions (NICs).?

To qualify for SMP, a woman must have completed 26 weeks’ service by the end of the 15th week before the week the birth is due. This is known as the ‘qualifying week’.

  • She must have average weekly earnings of at least the lower earning limit of £109 per week in the eight weeks up to and including the qualifying week.
  • She must still be pregnant, or have had her baby, by the 11th week before the expected week of childbirth.
  • She must have stopped working, or taken ordinary maternity leave.
  • She must have provided evidence of the expected date of birth.

There are two rates of SMP.

  • A woman entitled to SMP receives the higher rate, equal to 90% of her average weekly earnings if more than £136.78 per week for the first six weeks.
  • She then moves to a fixed rate of £136.78 or 90% of her average earnings if lower for up to 33 more weeks. These are set rates and are not altered in the case of multiple births.
  • The level of SMP has to be recalculated if a pay rise takes effect at any time between the start of the reference period and the end of the maternity leave, both ordinary and additional.

Employees not entitled to SMP may qualify for maternity allowance but the Government compensates employers for making SMP payments.

  • Small businesses can claim back more SMP than they pay out.You can claim 103% if you are a small enterprise with total NI payments (employer’s and employees’ combined) of £45,000 or less a year. No NI is payable on the standard rate of SMP, statutory paternity pay and statutory adoption pay.
  • Larger employers can reclaim 92% of the gross SMP paid.

SMP stops if the employee is taken into custody, or dies.

  • Mothers can work for ten days during maternity leave (known as ‘keeping in touch days’) without it affecting their right to SMP.

Some employers offer enhanced maternity pay to some or all of their female employees.

Maternity Allowance

Maternity allowance (MA) is paid by Jobcentre Plus and is based on the woman’s recent employment and earnings record.

  • Those who are self-employed, or a pregnant employee who is recently employed, or does not qualify for SMP, may qualify for MA.
  • These include women who earn between £30 and the lower earnings limit a week and have been employed or self-employed for at least 26 weeks of the 66 weeks ending with the week before the expected week of childbirth.
  • They must earn on average at least £30 per week.

MA is paid for a maximum of 39 weeks at £136.78 per week or 90% of average weekly pay if lower.

Paternity Pay

Fathers (or those with responsibility for bringing up children) are entitled to take paid time off at or around the time of the child’s birth. Those employees who qualify for paternity leave are entitled to ordinary statutory paternity pay (SPP).

  • SPP is for either one or two consecutive weeks as specified by the employee.
  • The rate of SPP is £136.78 per week or 90% of average pay, if lower.
  • Employees who have weekly earnings below the lower earnings limit for National Insurance purposes do not qualify for SPP.
  • As with SMP, employers claim back the SPP by making deductions from the NICs they usually forward to HMRC.

Male employees who become fathers, or who receive notification that they have been matched with a child for adoption, qualify for additional paternity leave and pay (APL&P).

  • APL allows the employee to take up to 26 weeks’ leave to care for their child.
  • They can only start their leave 20 or more weeks after the child’s birth or placement for adoption, and when their partner has returned to work from statutory maternity leave or adoption leave, or ended their entitlement to SMP or adoption pay.
  • Any employee wishing to take APL must give 8 weeks’ notice of when they want their APL to start.
  • The rate of APP is £136.78 a week or 90% of average pay, if lower.

Adoption Pay

Adoption leave and statutory adoption pay (SAP) is available to employees who adopt, or one member of a couple where the couple adopt jointly.

  • Most adopters are entitled to £136.78 a week or 90% of average pay if lower for up to 39 weeks.
  • Adopters who have average weekly earnings below the lower earnings limit for NICs do not qualify for SAP.
  • As with SMP and SPP, employers can recover the amount of SAP paid by offsetting the amount against NICs.
  • Any additional adoption leave is unpaid.?
  • A right to paternity leave and pay for the other member of the couple, or an adopter’s spouse or partner, is also available.
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