How to Calculate and Manage Maternity Pay: A Comprehensive Guide for UK Employers

A single error during the 15th week before an employee’s expected date of childbirth can trigger an HMRC audit that costs your business thousands in penalties. It’s a high-stakes calculation where precision is your only protection. We understand that managing maternity pay often feels like a complex balancing act between strict legal compliance and maintaining the human connection that defines your company culture. You likely believe that supporting a new parent shouldn’t mean risking a compliance failure or a budget deficit.

We’ve designed this guide to give you total peace of mind by simplifying the nuances of Statutory Maternity Pay (SMP). You’ll learn how to identify the correct qualifying weeks and follow a clear, step-by-step process to ensure every penny is accounted for. We also explore how businesses can reclaim 92% or even 103% of these costs from HMRC, turning a perceived financial burden into a manageable strategic task. We’re going to walk through the entire journey, from initial notification to the final reclaim, so you can focus on building a supportive and compliant workplace.

Understanding Your Maternity Pay Obligations as a UK Employer

Determining Eligibility: The 26-Week Rule and the Qualifying Week

Identifying whether an employee qualifies for maternity pay starts with a specific date: the Qualifying Week. This is defined as the 15th week before the expected week of childbirth. To begin this process, you need the MATB1 form. This medical certificate is usually issued by a midwife or doctor around the 20th week of pregnancy; it provides the official evidence you need to trigger statutory payments and leave arrangements. Without this document, your business isn’t legally obligated to start payments, so we recommend requesting it as soon as the employee is able to provide it.

The core requirement for Statutory Maternity Pay (SMP) is the 26-week continuous employment rule. An employee must have worked for your organisation for at least 26 weeks continuing into the Qualifying Week. This means they must have been on your payroll for roughly nine or ten months by the time the baby is due. Additionally, they must earn at least the Lower Earnings Limit (LEL). While the LEL for the 2024/25 tax year is £123 per week, you should prepare for potential adjustments in April 2026 to ensure your budget remains accurate.

Calculating the ‘Continuous Employment’ period

To find the start of the 26-week period, you must count back from the Sunday of the expected week of childbirth. If an employee has had a break in service, the clock usually resets. However, certain breaks, such as those caused by previous maternity leave or temporary cessations of work, might not break continuity. If a baby is born prematurely before the Qualifying Week, the employee is still eligible for SMP if they would have reached the 26-week milestone had the pregnancy continued to the 15th week before the due date.

The Average Weekly Earnings (AWE) test

Once you’ve confirmed the employment length, you must calculate the Average Weekly Earnings (AWE). This calculation is based on an eight-week ‘relevant period’ that ends on the last payday before the end of the Qualifying Week. You must include all payments subject to Class 1 National Insurance, such as basic salary, overtime, commissions, and even discretionary bonuses paid during this window. For detailed figures on current thresholds, you can consult the official government guidance on maternity pay to ensure your data is precise.

For 2026 compliance, the AWE test requires the employee’s gross earnings to meet or exceed the Lower Earnings Limit effective during the relevant eight-week calculation period. If you find these intricate calculations a distraction from your core business goals, our outsourced payroll team can provide the expert oversight you need to ensure every payment is accurate and compliant.

How to Calculate Maternity Pay Rates for 2026

Calculating maternity pay requires absolute precision to maintain both legal compliance and employee trust. For the 2026 tax year, the calculation process remains split into two distinct phases over a total 39-week period. During the initial six weeks, you must pay the employee 90% of their Average Weekly Earnings (AWE) before tax. You calculate this figure by averaging the earnings over the eight-week relevant period that ends on the last payday before the end of the 15th week before the baby is due.

For the following 33 weeks, the payment structure shifts to the statutory flat rate. For 2026, this rate is fixed at £194.32 per week. However, you must always apply the whichever is lower rule. If 90% of the employee’s AWE is less than the £194.32 threshold, you must pay the lower amount. It’s vital to remember that official government guidance on maternity pay confirms that Statutory Maternity Pay (SMP) is treated as earnings. This means you’ll need to deduct Income Tax, National Insurance, and any applicable pension contributions exactly as you would with a standard monthly salary.

Working with the 2026 statutory rates

The 39-week payment schedule demands rigorous administrative oversight. You provide 90% of AWE for weeks 1 to 6, then the flat rate of £194.32 (or 90% of AWE if lower) for weeks 7 to 39. HMRC mandates that employers keep accurate payroll records for at least three years to prove compliance. Many businesses find these manual calculations time-consuming; utilising outsourced payroll services can automate these complex figures and provide much-needed peace of mind.

Contractual Maternity Pay: Going beyond the minimum

Many forward-thinking firms choose to offer enhanced maternity packages to attract and retain top-tier talent. These bespoke schemes often provide full pay for a set period, such as the first three or six months. It’s a strategic move for culture building, but you must apply these benefits fairly across the organisation to prevent discrimination claims. You can include clawback clauses in your contracts. These allow you to recover the enhanced portion of the pay if the employee decides not to return to the business for a specific timeframe, often six months, following their leave.

Step-by-Step: Managing the Maternity Process and HMRC Reclaims

Handling the administrative side of maternity leave doesn’t have to be a source of stress. By following a structured timeline, you ensure your business remains compliant while supporting your employee during this transition. We’ve found that a methodical approach provides peace of mind for both the employer and the individual.

• Step 1: Your employee must provide notice at least 15 weeks before their expected week of childbirth. They should also submit their MATB1 form; this is typically issued by a midwife or GP after the 20th week of pregnancy.
• Step 2: You must respond in writing within 28 days to confirm their maternity pay start and end dates. This provides the clarity both parties need for effective resource planning.
• Step 3: Process payments through your standard payroll cycle. You’ll need to apply the correct deductions for tax and National Insurance just as you would with normal earnings.
• Step 4: Reclaim the costs from HMRC. This is done by including the total statutory payments on your Full Payment Submission (FPS) or Employer Payment Summary (EPS) via your Real Time Information (RTI) return.

How to reclaim SMP costs from the government

Most UK businesses can reclaim 92% of the Statutory Maternity Pay they pay out. However, if your business qualifies for Small Employers’ Relief, you can reclaim 103%. To qualify for this higher rate, your total Class 1 National Insurance contributions must have been £45,000 or less in the tax year before the employee’s qualifying week. Understanding the intricacies of employers national insurance contributions for 2026 becomes particularly important as the rates and thresholds change, affecting your eligibility for these relief schemes. If your cash flow is tight, you can apply for advance funding from HMRC up to four weeks before you’re due to make the first payment. This ensures you aren’t left out of pocket while waiting for the tax offset to take effect.

Notice periods and ‘Keeping in Touch’ (KIT) days

Effective communication is the cornerstone of a smooth maternity period. Employees must give 28 days’ notice if they wish to change their return date. During the leave, you can offer up to 10 KIT days. These allow the employee to work or attend training without losing their maternity pay or ending their leave. While you aren’t legally required to pay a specific rate for KIT days, 85% of the firms we consult choose to pay full salary, offsetting the SMP for that day. It’s a strategic way to maintain engagement and ease the eventual return to work.

Mitigating Risk: Avoiding Discrimination and Disputes

Secure Your Business Growth Through Compliant People Management

Managing maternity pay isn’t just about ticking a bureaucratic box; it’s about protecting your business from the 100% uncapped tribunal awards that can arise from discrimination claims. You’ve got to ensure your calculations for the 2026 tax year are precise, whether you’re applying the flat statutory rate or 90% of average weekly earnings. Accuracy during the qualifying week, which is exactly the 15th week before the expected week of childbirth, is vital for your HMRC reclaims. Small employers can often reclaim 103% of these costs if their annual National Insurance contributions are £45,000 or less, making precision a direct benefit to your bottom line. With the significant changes to employers national insurance contributions coming in 2026, understanding how these adjustments affect your reclaim eligibility becomes even more crucial for maintaining healthy cash flow.

We understand that balancing legal precision with a supportive culture feels like a high-wire act. Our team provides the “safe pair of hands” you need to navigate these complexities without the stress. We offer expert employment law advice and specialist payroll support to ensure your business remains fully compliant while supporting your growing team. Whether you need bespoke HR policies or strategic guidance, we’re ready to partner with you. As the Employment Rights Act 2025 brings sweeping changes to statutory payments, including the new statutory sick pay 2025 rules, having expert support becomes even more essential for managing your payroll obligations effectively.

We look forward to helping you build a resilient, people-first workplace where your business and your employees can thrive together.

Frequently Asked Questions

Can I refuse to pay maternity pay if the employee has only worked for me for 3 months?

You can legally refuse to pay Statutory Maternity Pay (SMP) if the employee hasn’t met the 26-week continuous service requirement. To qualify, an individual must have worked for your business for at least 26 weeks by the end of the 15th week before their baby is due. Since three months is approximately 13 weeks, they won’t reach the necessary threshold for you to process these payments through your payroll.

While they don’t qualify for SMP, you’re still responsible for providing the necessary paperwork so they can seek support elsewhere. You must issue an SMP1 form to the employee, which allows them to claim Maternity Allowance directly from the government. This ensures your business remains compliant while the employee still receives the financial support they’re entitled to from the state.

How much of the maternity pay can my business actually reclaim from HMRC in 2026?

Most UK businesses can reclaim 92% of the Statutory Maternity Pay they pay out to their staff. If your business is smaller and qualifies for Small Employers’ Relief, you can actually reclaim 103% of the cost. You qualify for this higher rate if your total Class 1 National Insurance contributions were £45,000 or less in the relevant tax year before the employee’s qualifying week.

We find that many directors worry about the cash flow impact of these payments, but the reclaim process is straightforward through your regular RTI payroll submissions. For the 2025/26 tax year, these percentage rates remain the standard for HMRC recovery. This system is designed to protect your bottom line while ensuring your team receives the essential **maternity pay** they need during their leave.

What happens to maternity pay if I have to make the employee redundant?

If an employee is already entitled to SMP when their redundancy occurs, you’re legally obligated to continue paying it for the full 39-week period. Redundancy doesn’t terminate your responsibility to provide statutory payments once the qualifying criteria have been met. Even if the contract ends, the payment schedule stays the same unless the employee starts a new job with a different employer.

Navigating redundancies during maternity leave requires a bespoke approach to avoid discrimination risks, especially with the 2024 legal updates regarding redundancy protection. You must ensure the selection process is fair and that you’ve explored all alternative roles. If the redundancy happens before the qualifying week, the employee won’t be eligible for **maternity pay** from your business, and you’ll need to provide an SMP1 form.

Is maternity pay subject to National Insurance and tax deductions?

Maternity pay is treated as earned income, so it’s subject to the same tax and National Insurance deductions as a regular salary. You must process these payments through your PAYE system just as you would for any other active member of staff. This includes deducting student loan repayments and any other statutory or voluntary deductions that usually apply to their pay packet.

It’s also vital to remember that pension contributions should continue based on the employee’s actual pay during the maternity period. While the employee’s contributions might drop because their income is lower, your employer contributions must usually be based on their normal, full salary. This ensures the employee’s long-term financial well-being isn’t compromised while they’re away from the workplace.

Do I have to pay maternity pay if the employee does not intend to return to work?

You’re legally required to pay Statutory Maternity Pay even if an employee tells you upfront that they don’t plan to return to their role. SMP isn’t a reward for future service; it’s a statutory right earned through their previous period of employment. You can’t ask for this money back if they resign during or after their leave, as it’s a non-refundable legal entitlement.

The rules change slightly if you offer an enhanced or “contractual” maternity package that goes above the legal minimum. In these cases, you can include a specific clause in your employment contracts requiring them to return for a set period, such as 6 months. If they don’t return, you may be able to reclaim the “enhanced” portion of the pay, but never the statutory element.

What is the ‘Qualifying Week’ and why is it so important for calculations?

The qualifying week is the 15th week before the expected week of childbirth, and it’s the anchor for almost all maternity calculations. This date determines whether an employee has worked for you long enough to qualify for payments and sets the timeframe for calculating their average weekly earnings. It’s the point where you’ll assess if they’ve earned at least £123 per week on average.

Accuracy is essential here because being off by just one day can change an employee’s eligibility status. We recommend using a reliable maternity calculator or seeking strategic HR support to ensure your dates are perfect. Once the qualifying week passes, the employee’s entitlement is generally locked in, providing peace of mind for both the business and the expectant parent.

Can an employee receive maternity pay while working ‘Keeping in Touch’ days?

Employees can work up to 10 ‘Keeping in Touch’ (KIT) days during their maternity leave without it affecting their statutory pay. These days are designed to help staff stay connected with the business, attend training, or join team meetings. Both you and the employee must agree to these days; you can’t force them to work, and they can’t insist on coming in.

When an employee works a KIT day, you should agree on a daily rate of pay, which must be at least the National Minimum Wage. Working even one hour counts as using one of the 10 available KIT days. This is an excellent way to maintain engagement and ensure a smooth transition when they eventually return to their full-time responsibilities.

What form do I need to give an employee if they don’t qualify for SMP?

You must provide the employee with form SMP1 if they’re ineligible for statutory payments from your business. This form must be issued within 7 days of you making the decision that they don’t qualify. It’s a critical document because it details the specific reasons for the refusal, such as not meeting the earnings threshold or the length of service requirement.

Providing this form promptly is more than just a compliance tick-box; it’s a supportive gesture that helps your employee access alternative funds. They’ll need the SMP1 to apply for Maternity Allowance through the Department for Work and Pensions. Handling this professionally reinforces your reputation as a “safe pair of hands” and ensures the employee isn’t left without financial options during their pregnancy.

Article by

Josephine Broadstock

Josephine Broadstock is the Founder of Altum HR and a recognised thought leader in HR strategy and operational delivery. With a career grounded in employment law and hands-on business support, Josie has built a reputation for helping organisations move beyond transactional HR into truly strategic, commercially aligned people management.

At the core of Josie’s approach is a belief that HR should not sit in isolation—it should actively drive business performance. She works closely with business owners and leadership teams to understand how their organisations function in practice, not just on paper, enabling the design and implementation of people strategies that are both legally robust and operationally effective.

Josie specialises in translating complex employment law and HR challenges into clear, practical solutions that support growth, reduce risk, and improve organisational efficiency. Her work often focuses on bridging the gap between policy and execution—ensuring that processes are not only compliant but also embedded into day-to-day operations in a way that adds measurable value.

Through Altum HR, Josephine leads a team of highly qualified consultants who share her commitment to quality, personalisation, and commercial impact. She is particularly passionate about raising standards within the HR industry, advocating for a more consultative, expert-led approach that prioritises long-term business outcomes over quick fixes.

As an author, Josie shares insights on employment law developments, operational best practice, and real-world HR challenges, offering business leaders practical guidance they can apply immediately. Her content is designed to cut through complexity and provide clarity in an ever-evolving workplace landscape.