Small employers reclaim more maternity pay than they pay

A small employer that pays Statutory Maternity Pay gets back 109 per cent of it from HMRC, not the 92 per cent larger employers recover. The extra 9 per cent arrives through payroll, and the test for it is one that most businesses with a handful of staff pass comfortably.

The same rates apply to Statutory Paternity, Adoption, Shared Parental, Parental Bereavement and Neonatal Care Pay.

Who counts as small

HMRC's rates for employers in 2026 to 2027 set the line at £45,000 of Class 1 National Insurance, employee and employer contributions together, in the previous tax year. At or below it, you recover 109 per cent. Above it, 92 per cent.

The year that counts is the last complete tax year before the qualifying week, which for maternity pay is the 15th week before the week the baby is due. The Employment Allowance is ignored: you measure the National Insurance before it is taken off.

To put £45,000 in context, eight staff each earning £30,000 generate about £41,155 of Class 1 National Insurance a year between them, employee and employer shares together. A team of that size is still a small employer for this purpose.

What the employee receives

Statutory Maternity Pay runs for up to 39 weeks: 90 per cent of the employee's average weekly earnings for the first six weeks, then £194.32 a week, or 90 per cent of average weekly earnings if that is lower, for the remaining 33. Many employers pay more under their own contract terms. Only the statutory part is recovered.

One employee, costed

Illustration, not a real business. Rosa works for an online homeware business in Barking on £2,400 a month, which makes her average weekly earnings about £553.85. The business paid well under £45,000 of Class 1 National Insurance last tax year.

• First six weeks at 90 per cent, £498.46 a week: £2,990.77.

• Next 33 weeks at £194.32: £6,412.56.

• Total Statutory Maternity Pay: £9,403.33.

At 109 per cent, the business recovers £10,249.63, which is £846.30 more than it paid out. A larger employer, recovering 92 per cent, would get back £8,651.06 and bear £752.27 itself.

How the money comes back

The recovery is claimed through payroll, on the Employer Payment Summary sent to HMRC, and set against the PAYE you would otherwise pay that month. If the amount is more than you can set off in the year, you can write to HMRC for a repayment once the next tax year starts.

If you cannot afford to pay the statutory amounts while you wait, you can apply for HMRC to pay you in advance, up to four weeks before the first payment is due. HMRC warns that a penalty of up to £3,000 per employee for each tax year can apply if an application contains incorrect information.

Statutory Sick Pay is different. It cannot be recovered at all.

Before the first notice arrives

• Find last tax year's total Class 1 National Insurance, both shares, in your payroll year-end figures.

• Check your payroll software is set to the right recovery rate.

• Diary the qualifying week as soon as an employee tells you the due date, because that fixes which year's figure applies.

Our guide to statutory pay for small businesses covers sick pay and holiday pay alongside maternity pay, and our page for small businesses sets out how we run payroll each month. Look up last year's National Insurance total this week, so you know which rate applies before you need it.

About the author

Harvey Dhillon is Founder and CEO of Zmartly, an accountancy firm for small businesses. He grew up in West London and began his career in finance at Barclays, in investment banking and wealth management, before going full-time on Zmartly in 2020.

Featured photo by Matilda Wormwood on Pexels.