Can you claim statutory maternity pay as a contractor?

If you are a contractor working through your own Limited company you are entitled to standard employee benefits and therefore you should be entitled to statutory maternity pay (SMP).

How have Clearways Accountants helped contractor clients with maternity leave payments?

Our contractor client worked in the IT sector and was expecting a baby.  Happy news indeed!

She intended to take her full period of maternity leave before looking for a new contract.  Under the terms of SMP, the employee needs to fulfill certain qualifying criteria.  These are:

  1. Continuous employment by your employer for a period of at least 26 weeks into the qualifying week, where the qualifying week is the 15th week before the week in which the baby is due.  For contractors working through their own Limited company this should be a straight forward criteria to meet; and
  2. You must have been earning on average an amount which at least equals the lower earnings limit.  The lower earnings limit is the amount you have to earn before you are treated as paying National Insurance contributions and for our IT contractor (and most contractors) your accountant should be running your monthly payroll for at least this amount.  In 2016-17, this is £112 a week (or £486 per month).

If you satisfy both the continuous employment rule and the earnings rule, you can claim SMP and your Contractor Limited company will need to pay your SMP.

For a larger employer the maternity pay is deducted from the amount of PAYE and National Insurance due to HMRC every month.  For our IT contractor client, this would not be possible as the most tax efficient salary is too low for any PAYE.

For smaller employers, including our IT contractor, the Government have a scheme that allows the employer to apply for advance funding of SMP.

The application is made through a SMP application email and your accountant will need to have a copy of your MAT1 plus information on your earnings.  The funds will be transferred directly to the company bank account and can then be paid on to you monthly via the payroll.

Remember, once you have a baby you can use childcare vouchers to help pay for a nursery place when you return to contracting.

Please contact Clearways Accountants on 01737 244298 if you need help making your SMP claim or setting up your childcare voucher scheme for your contractor Limited company.