Sick pay, maternity pay and paternity pay
What can you claim? How long do you have to work for your company before you’re entitled to claim, and what are the alternatives if you’ve not worked long enough?
As a Limited Company contractor, if you fall ill and are unable to work the responsibility lies with you to organise statutory sick pay for yourself through your company. This is also the case if you or your partner becomes pregnant and you want to claim statutory maternity or paternity pay. Your contractor accountant will be able to advise you on this, but it is helpful to be aware of the general rules on what you can claim and for how long.
Statutory Sick Pay (SSP)
If you fall ill, as an employee of your Limited Company you can claim up to £85.85 SSP per week. If the condition is serious, the maximum period this is payable is up to 28 weeks. SSP is paid from the company directly to the contractor and the amounts are deducted from the PAYE paid over to HMRC.
To qualify you must earn above the lower weekly earnings limit of £107. Also, there are three ‘waiting days’ before SSP is payable and each day paid must be a Qualifying Day. This means that it must be a day that is normally a business working day for you e.g. Monday to Friday.
For SSP it does not matter how short a time you have worked for your company. As long as you have done at least some work you can qualify for payment.
SSP is not likely to cover the income you’re used to, so it’s a good idea to also consider separate health or life insurances. Your contractor accountant will be able to recommend someone you can talk to about such things.
Statutory Maternity Pay (SMP)
Statutory Maternity Pay is paid to female employees who have recently given birth or who are about to give birth. To qualify they must worked for the company ‘for at least 26 weeks up to the 15th week before the expected week of childbirth – known as the ‘qualifying week’’.
The rules on SMP state that:
- The company must ordinarily be given 28 days notice of maternity leave
- Medical evidence of pregnancy (Form MATB1) must be provided
- Average weekly earnings (AWE) must be above the lower earnings limits for the relevant period
- SMP is not payable in any week that the employee does some work
An employee may take up to one year off in the weeks before and after the birth, but not all of this time qualifies for SMP.
An employee can claim up to 39 weeks SMP at the following rates:
- 90% AWE for the first six weeks
- 90% AWE or £135.45 per week – whichever is lower – for up to 33 weeks
SMP is regarded as salary and is therefore subject to all relevant taxes.
For small companies it is possible to reclaim 100% of SMP payments in addition to 3% NIC compensation from HMRC.
If a Limited Company contractor does not qualify for SMP, either because they have not worked for the company long enough or because they earn below the lower income threshold, then they may qualify for Maternity Allowance (MA). This pays £136.78 for up to 39 weeks or 90% of your AWE – whichever is lower.
Statutory Paternity Pay
Statutory Paternity Pay (SPP) is payable to male employees who are biological or adoptive parents of a newborn and is payable within 8 weeks of the birth or the date the baby is placed with them.
One or two weeks’ paternity leave can be taken with SPP of 90% of AWE or £135.45 – whichever is lower. If you have a contractor accountant ensure that you give them sufficient notice of when you would like SPP payments to commence.
As with SMP, if you are a small company you can claim 100% of SPP payments made in addition to 3% NIC compensation.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.