Maternity pay for small business

Maternity pay for small business

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I have a client who is self employed. He pays his wife a small wage for duties performed in the business (no other employees). The wife is now pregnant. What are his obligations/options regarding maternity pay?

Many thanks
JF

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By AnonymousUser
21st Jan 2005 14:59

Employee may qualify for SMP & her employer could claim back 104
If the woman is an employee of the company she will be entitled to Statutory Maternity Pay (SMP) of up to 26 weeks. To qualify for SMP, she must be employed 26 weeks by the end of the 15th week before the baby is due and have average weekly earnings of at least £79 per week if her baby is expected up to 16 July 2005; thereafter £82 per week.

Consequently she does not have to be earning enough to pay NI to qualify. Average earnings are normally based on the last eight weeks pay up to the 15th week before the baby is due. There is a checklist in the Inland Revenue's guide book E15 to help small employers calculate the average correctly. The E15 is free and can be downloaded from www.inlandrevenue.gov.uk or see employer's pack.

Payment of SMP consists of 6 weeks at 90% of average weekly earnings plus a further 20 weeks at the lower rate of £102.80 (rising to £106 from 3 April 2005). However if 90% of average earnings is less than the lower rate, 90% of average earnings is paid throughout the 26 weeks SMP pay period. The earliest SMP can be paid is 11 weeks before the baby is due unless it is an early birth. The latest is the day following the birth.

As already mentioned if the owner is also an employee of the company he can claim 2 weeks's paid paternity leave of £102.80 (£106 from 3 April)per week or 90% of average weekly earnings if less. The average is calculated in the same way as SMP.

To qualify he must be employed 26 weeks, 15 weeks before the baby is due and minimum average is the same as for SMP. Paternity leave must be taken within 56 days of the birth or expected date whichever is later.

The employer can reclaim from the IR 104.5% of the SMP and SPP paid if the last complete tax year before the 15th week before the baby is due, the total NI for the company is £45,000 or less.

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By sbmarshall
18th Dec 2004 17:55

maternity pay
If your client is a "one man band" (ok, 2 with his wife) limited co, he'll be an employee too & will have paternity leave entitlement, won't he? Has the wife been employed long enough to qualify for maternity pay?

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By Abacjm
17th Dec 2004 13:02

Maternity Pay for Small Business
JF,
I would think that if the wife is employed under PAYE and is paid at the rate which means that NI is actually paid, then she should qulaify in the same way as if she was employed by ICI.

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