Northgate Interiors: maternity pay and a linked sickness spell

Eligibility - all four tests are met:

• 26 weeks' continuous service by the end of the qualifying week. The expected week of childbirth is the week commencing 9 December 2024; the qualifying week is 15 weeks earlier, i.e. week commencing 26 August 2024. She has worked since March 2019.
• Average weekly earnings at or above the lower earnings limit (£123 a week).
• She gave the MATB1 and correct notice.
• She has stopped work.

Average weekly earnings = £2,400 × 12 ÷ 52 = £553.85

SMP calculation

• First 6 weeks: 90% × £553.85 = £498.46 a week → 6 × £498.46 = £2,990.76
• Next 33 weeks: the lower of £184.03 and 90% of AWE (£498.46) → £184.03 a week → 33 × £184.03 = £6,072.99
• Total SMP over 39 weeks = £9,063.75

She may take up to 52 weeks' maternity leave, but only 39 weeks are paid. Starting leave on 25 November 2024 is permitted - leave can begin on any day from 11 weeks before the expected week of childbirth up to the day after the birth.

Recovery rate. The standard recovery rate is 92%. A small employer can recover 103% (the extra 3% is compensation for the employer NIC still payable on the SMP). Small employer means employer's NIC for the previous tax year was £45,000 or less - here £38,400, so the 103% rate applies.

• Recoverable = £9,063.75 × 103% = £9,335.66

How it is claimed. SMP is paid to Nadia through the payroll and the recoverable amount is deducted from the PAYE, employee NIC and employer NIC that would otherwise be paid over. The claim is made by sending an Employer Payment Summary (EPS) for the final pay period in which SMP was paid, normally by the 19th of the following month. The EPS is also what triggers the Employment Allowance claim.

Tax and NIC. SMP is taxable - PAYE is operated on it using Nadia's normal code at the time of payment. It is not liable to NIC (unlike SSP), so no employee or employer NIC arises on the SMP itself, nor do SMP payments count towards the earnings on which NIC is calculated.

Records of SMP paid and recovered must be kept for three years after the end of the tax year.

The two spells are linked. Periods of sickness separated by 8 weeks (56 days) or less are treated as one. Last day of the August spell was 14 August 2024 and the October spell began 7 October 2024 - 54 days apart, so they link.

The waiting days have already been served. The August absence was exactly three days, all of which were waiting days, and no SSP was paid. Because the spells link, those waiting days are not served again.

SSP is therefore payable from day 1 of the October absence, for all five qualifying days (Monday to Friday):

5 × £116.75 = £583.75

If the spells had not linked, Tom would have lost three more waiting days and received only 2 × £116.75 = £233.50 - so the linking rule is worth £350.25 to him.

Other points:

• Tom's earnings of £450 a week are well above the lower earnings limit of £123, so he is entitled.
• SSP is subject to PAYE and NIC (it counts as earnings for NIC purposes), unlike SMP.
• The maximum SSP spell is 28 weeks; the absence is self-certified, which is acceptable for spells of 7 days or less.
• The SSP is recovered in the same way as other statutory payments, through the EPS.