Statutory Maternity Pay - SMP, UK Payroll (Doc ID 550248.1)

Last updated on DECEMBER 14, 2023

Applies to:

Purpose

Statutory Maternity Pay - SMP

Statutory Maternity Pay, SMP, was introduced as a Statutory payment for female employees who are absent from work due to Childbirth. This payment was to ensure that employees receive payments when they take time off with their baby.

Employers can choose to pay Occupational Maternity Pay, OMP, but this has to be greater than the value of SMP and records have to be kept for Inland Revenue Audit purposes.

Summary of terms for SMP

Expected Week of Child Birth, Confinement (EWC)

This is the week that the baby is expected to arrive, ie the week in which the baby is due to be born.

Maternity Pay Period (MPP)

The period when a woman is paid SMP is called the Maternity Pay Period (MPP). It starts on any day of the week depending upon the employee’s circumstances and when she stopped work due to her pregnancy.

If:

· the woman gave her employer notice of when she wanted to wanted her SMP to start and has stopped work in line with that notice after the start of the 11th week before her EWC, her MPP will start on the day she has chosen, or
· she gives birth before the 11th week before the EWC or before the day she told her employer she wanted to start her SMP her MPP will start on the day after she gave birth, or
· she is absent from work because of a pregnancy-related illness on or after the Sunday of the 4th week before the EWC her MPP will start on the day after the first complete day she is absent from work for that reason, or
· she leaves her employment after the start of the QW but before the start of the 11th week before the EWC, her MPP starts on the Sunday of the 11th week before the EWC, or
· she leaves her employment after the start of the 11th week before the EWC but before her MPP is due to start, her MPP starts on the day after the last day of her employment.

The MPP can only start earlier than the 11th week before the EWC if the baby is born earlier than this date.  In order to enable leave to be input before the earliest normal date, the actual date of birth of the child must be input.
The latest the MPP can start is the day after the date of birth.

Average Weekly Earnings (AWE)

To get SMP an employee’s average weekly earnings in their ‘set period’ must reach at least the LEL which applies on the Saturday of their Qualifying Week,QW.
The set period is their last eight weeks pay before the Saturday of their QW.
The average weekly earnings are also used to calculate the rate of SMP payable.

Calculation of Average Earnings

Based on QW in October, with a pay date at the end of October, we need to use
the NICable from August and September.

NICable Aug + NICable Sept = total NICable

total NICable * 6 / 52

Earnings

Average weekly earnings should include all earnings paid in the “set (or relevant) period” that attract a Class 1 NIC liability, or would if they were high enough.
Including Statutory Adoption Pay (SAP), Statutory Paternity Pay (SPP), Statutory Maternity Pay (SMP) and Statutory Sick Pay (SSP).

If your employee’s earnings are lower than the LEL, you may need to add in enough of any earnings subject to Class 1B NICs within the ‘set period’ to bring their earnings up to the LEL need to Earnings related rate.

The amount of SMP paid for the first 6 weeks of the Maternity Pay Period.

It is 90% of the average weekly earnings.

Gross Earnings
The amount the employee is due to receive before any deductions are made.

Late Notification

Where it is not reasonably practicable for your employee to give you statutory notice, they must do so as soon as it is. You will need to decide if it was reasonably practicable for the employee to have given the you notice on time. You should be flexible about notice because there is often a difference between the expected date of birth and the actual date of birth. If the baby is born early you must accept that notification was on time.

If your employee doesn’t notify you at least 28 days before they want to start to be paid SMP and you feel there was good cause for delay, you must accept that the notification is in time.
If you are not satisfied there was a good reason for the delay in notifying you the employee may be able to delay the start of their maternity leave and SMP but maternity leave must start no later than the day following the birth.

Legal Custody

Legal custody means detained, arrested or in prison. It doesn’t include voluntarily helping the police with enquiries, serving a suspended sentence or being on bail. If the employee is taken into legal custody the employer should send them form SMP1.

Length of Employment

For SMP your employee must be employed by you continuously for 26 weeks ending with the Qualifying Week (QW)

Lower Earnings Limit (LEL)

This is the minimum level of earnings that an employee needs to qualify for SMP.

For SMP it is the LEL which applies on the Saturday of the Qualifying Week (QW) that must be used.

MATB1 maternity certificate

The form gives the date the baby is due. It is signed by a doctor or midwife and issued after the 20th week of pregnancy. The expectant mother must give this form to the employer this form is to confirm that she is pregnant. You must not pay SMP without it or similar evidence.

Maternity Leave Date

Statutory maternity leave can start on any day of the week but the day SMP can start may be different as it depends on:

· when the employee wants to start their leave,
· whether they have been off work with a pregnancy related illness, and
· when the baby is born.

National Insurance Contributions (NICs)

For SMP purposes these are the Class 1 NICs paid by employers and their employees. Both the employer and the employee must be liable to pay Class 1 NICs or would be but for the level of earnings or employee’s age.

For SMP recovery or funding purposes, they are the employer’s total gross employer’s secondary plus all their employees’ primary Class 1 NICs liability in all the employers PAYE schemes.

Notification Periods

Time limits for your employee to notify you of their intended dates for pay and leave.

Qualifying Tax Year

The Qualifying Tax year for deciding the LEL appropriate to an employee’s average weekly earnings for SMP entitlement is the tax year that in which the on the Saturday of the employee’s Qualifying Week (QW) falls.

Set Period

The “set period” or “relevant period” is needed to establish the earnings to be used and the number of days, weeks or months to divide those earnings by. All earnings paid in the “set period” are divided by the number of days, weeks or months in that “set period”.
Regulations define the “set period” as the period between;
· Date 1 the last normal payday on, or before the Saturday of the 15th week before the baby is due. This payday will be Date 1 in the “set period”
· Date 2 the last normal payday falling not less than eight weeks before the payday at Date 1. Date 2 will be the day after this payday and is the start of the “set period”.
· should include all the earnings paid on, or after Date 2, up to and including those paid on Date 1.
· The “set period” ends with the last normal payday on, or before the Saturday in the 15th week before the week baby is due and starts with the day after the last normal payday at least 8 weeks before that.

SMP 1 (form)

Details the reasons why you cannot pay your employee Statutory Maternity Pay

Standard Rate

The standard rate to pay for SMP pay weeks starting on, or after Sunday 2 April 2006 is £108.85. The amount the employer actually pays to their employee is the lesser of the standard rate and the earnings related rate (90% of the employee’s average weekly earnings), the remainder of the SMP pay period following the first 6 weeks is paid at the earnings related rate.

Statutory Maternity Pay (SMP)

SMP is a legal entitlement to a certain amount of pay to help a mother take time off around the time of birth.

Week

For working out SMP entitlement and payment, a week is a period of seven days

System Set up – SMP

This covers the basic set-up of SMP and is designed to be used along with
the Oracle SSP/SMP User's Guide.

The following, details a very simple set-up of SMP with an element to total the
SMP Payments and an element to actually pay the SMP payments to employees.

This documentation does not include offsets to employee's salaries as can be
calculated in the formula which attaches to the elements. This is purely to
take the SMP amount to be paid and pay that value to the employee.

The process documented below is for a very simple set-up of SMP in HRMS using
no bespoke forms or menus, paying the total SMP to employees using a very simple
formula, having no extra withholding reasons and notifications set to Accept.
This should be taken into account when following these instructions.

The first thing you should do is set up your SSP/SMP responsibility in System
Administrator as you would for SSP.

You do this by following these steps :

1 - Go to System Administrator Responsibility and navigate to SECURITY,
RESPONSIBILITY, DEFINE.
2 - Give the New Responsibility a Name.
3 - Select the Application (Oracle SSP)
4 - Enter a Responsibility Key
5 - Ensure that the From date is early enough (it will default to sysdate)
6 - Datagroup Name: Standard Application: Oracle SSP
7 - Request Group Name : SSP reports Application: Oracle SSP
8 - Menu, select SSP Top
9 - Select any exclusions you might require.
10 - Go to, SECURITY, USER, DEFINE.
11 - Add your new responsibility to your user.
12 - Proceed to PROFILES, SYSTEM, and for your new SSP Responsibility, ensure
that you have the correct Business Group assigned (it will default to
Set-up Business Group).

The SSP/SMP User's Guide is quite straight forward at this point.
Check out the appendix Implementation Steps for Oracle SSP/SMP.

After setting up your Responsibility etc. (as above) the User Guide suggests
defining your QuickCode values. If you already know what you want to have
defined in these. If you do not, do not worry, as QuickCodes can be added to,
enabled or disabled at any time in the implementation process.

The manual also covers setting up descriptive flexfields in some detail.
If these are required, then it is a good time to set them up.

THE SEEDED ELEMENTS

Setting up elements to be used for Processing SMP Payments, both to maintain the SMP balance and to make the payment to the employee.

There are 2 seeded SMP Elements. Statutory Maternity Pay and SMP Corrections.
These are both non-recurring, non-payment elements. These will need to be
activated, by having links defined for them, (make sure that they are linked
far enough back into the past so as not to cause problems entering data).
The system will automatically fire off these elements when a sickness absence
is entered for an employee. Also it is very important to ‘link to all payrolls’ or this can cause problems with continuity of the payments if someone changes payroll mid absence… they may get errors ‘link is not valid etc’.

If you do not need to report on SMP balances or pay SMP to your employees, then
this is as far as you need go. However, if you wish to do so, you will need to
set up two more elements for each function.

There is further information about reasons for setting up these elements in the
User Guide.

SETTING UP ADDITIONAL ELEMENTS FOR SMP PROCESSING

SMP Balance Element

If you need to maintain the SMP Total balance, you should define an SMP Total
element. In the Element Description form, date track to a suitable start date
for the element. Enter the name SMP Total

- Enter a primary classification of SMP Non Payment
- Check the Indirect Results Only flag
- Processing Priority, must be after that of the Statutory Maternity Pay (seeded)
element.
- It should be a non-recurring element
- In Input Values, take the default of Pay Value, Units Money
- In Balance Feeds, the input value must be set up to feed the Balance Name of
SMP Total (this is also a seeded balance), once the input value is picked in,
all fields will default except Balance Name, which the user must input
manually

Save this element and create a link for it. Again ‘link to all payrolls’ checkbox

SMP Payment Element

If you need to pay SMP, you need to define an SMP Paid element. The set-up of
this element will depend on your business rules. You can feed this element as
an indirect result from the Statutory Maternity Pay element via a formula, or you
can process it separately in a payroll run. If you are offsetting the SMP
payments from salary payments, the set-up will also vary, see the User's Guide
for more information.

The following is a description of how you can set up the element to be fed from
the Statutory Maternity Pay element, will the amount calculated here, being paid to
the employee, via a very simple formula.

In the Element Description form, date track to a suitable start date for the
element. Enter the name SMP Paid.

- Enter a primary classification of Earnings
- Check the Indirect Results Only flag
- Processing Priority, must be after that of the Statutory Maternity Pay (seeded)
element
- It should be a non-recurring element
- Process in Run should also be taken as default
- In Input Values, take the default of Pay Value, Units Money


Save this element and create a link for it. Again ‘link to all payrolls’ checkbox


WRITING A SIMPLE FORMULA
In order to feed the Amount in the Statutory Maternity Pay element to the Pay Value
of both of the optional elements, you will have to write a formula.

The following is a very simple example, but whoever writes this formula should
be conversant with their own business rules.

In the Write Formulas Form :
The formula type is Oracle Payroll

The formula would be something like :

INPUTS ARE AMOUNT
RETURN AMOUNT

This will literally take the input value of amount, which is the input value on
the Statutory Maternity Pay element which holds the amount of SMP due. This returns
whatever this value is.

This will need to be verified, before it can be used in a Formula Result Rule.

FORMULA RESULT RULES

This is the way in which you associate your formulas with your elements.

In the Formula Results form.

- Select the element Statutory Maternity Pay
- Select the processing Rules, Name should be Standard, formula should be the
formula that you have just written.

Formula results are the elements, which you want to be fed by the Statutory Maternity
Pay, amount.
In this case, both SMP Paid and SMP Total and ssp corrections and any of the other Maternity type elements eg. SPP, SAP etc – and their corresponding Corrections elements are to be fed by this formula.

Select the name of the Input value you want to use on the Statutory Maternity Pay
element, in this case it will be AMOUNT, the type should be Indirect, as it is
being passed through a formula. The elements are your two SMP elements that you
have just set up and the Input Value should be the one to which you are passing
the amount.

In this case it would be Pay Value. Save the record.

The elements must have Processing Priorities in the correct order, example:
The Statutory Maternity Pay element must have a higher processing priority than the
SMP Total and the SMP Paid elements, or they will not appear in the picklist on
the Formula Results form.


ABSENCE TYPES

There is a seeded Type with the category of Maternity.

At this point you are ready to begin setting up maternity absences on
Employee's records.


Additional information on SMP can be found on the Inland Revenue Website

http://www.hmrc.gov.uk/

Every year when the rates change you can go to the IR site for the upto date values

Scope

Users and implementors of UK HRMS

Details

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