Maternity Leave in small businesses

In April 2007, changes made in the Employment Rights Act 1996 start taking effect, which improve the entitlements for employees who become pregnant. I’ve been reading a bit about what these entitlements will become.

I started by reading up on what expectant mothers are entitled to…

Women who become pregnant can take up to 52 weeks maternity leave.

The first 26 weeks of maternity leave are called Ordinary Maternity Leave (OML). During OML, women still get all the same rights under their normal contract. For example, they still build up holiday, and are elegible for things like pay raises and pension contributions that they would normally be. After OML, they can come back to the same job.

The next 26 weeks of maternity leave are called Additional Maternity Leave (AML). During AML, women still get some of the same rights under their contract, but not all. For example, terms and benefits such as pay raises and holiday pay do not have to be continued during this. After AML, they should be offered their old job back, unless this is not reasonably practical.

Statutory Maternity Pay (SMP) defines how much women are entitled to earn while on maternity leave. For the first 6 weeks (of OML), SMP is 90% of average earnings. For the next 33 weeks, it is a flat rate of £108.85 per week.

It’s worth pointing out that I think maternity leave is a great idea. When my wife took a year off work after our daughter was born, this made a big difference for us, and we are very pleased that she was able to do it. I only had a month off for paternity leave, and wished it could have been longer.

That said… from an employer’s perspective, this was all sounding a bit expensive. If you lose a key employee for a whole year (and in a small business, this loss is often felt all the more keenly), this has a significant impact. A temporary replacement needs to be found, which means recruitment – never a lot of fun. And for 39 weeks, you’re paying two people to do the same job. For any small business, this is a worrying prospect. For a small charity, even more so. We started to do some back-of-the-envelope calculations wondering if SYA could afford this… it didn’t look great.

A little bit of Googling later and I’d uncovered information intended for employers, with some reassuring news. The DTI guidance (pdf) says that:

You should find out about claiming back the SMP you pay. You are entitled to claim back at least 92 percent. Small employers are able to claim back all the SMP plus some compensation.

How small is a “small employer”? I found the answer on the HMRC website:

companies with an annual liability for National Insurance contributions of £45,000 or less are entitled to claim back 100% of the SMP plus 4.5% additional as compensation for the NI contributions paid on the SMP

The problems of losing a key member of staff for a while and having to find an effective temporary replacement remain. But it looks like the system is geared up so that it shouldn’t cause small businesses a massive financial burden. I should’ve guessed, really.

Oh – and if you haven’t guessed where my sudden interest in maternity pay has come from? Here’s a clue – as a trustee of Solent Youth Action, I’m a director of a small company employing seven members of staff. All of them women. 🙂

13 Responses to “Maternity Leave in small businesses”

  1. dale says:

    How did people cope before the Internet?

    Sometimes – like with this – it really feels like you don’t need to know anything nowadays. You just spend a little time with Google, and there you go – the Internet is your extended memory and all-knowing sage rolled into one!

    Just a thought 🙂

  2. JohnPearson says:

    Nice Post.

    That was well said. Always appreciate your indepth views. Keep up the great work!


  3. paul says:

    that’s great I have a small company and I was worried

  4. Hi, I hope your site is the right place to ask this question; I own a small business and can not really afford to have my employees on leave for months at a time. Do I have to provide maternity, paternity and medical leave? It would be interesting what your readers think.

  5. Anne says:

    We have a small garage, and have just found out one of our female mechanics is 10 weeks pregnant, she has been told not to lift anything heavy which is fair enough but seems to think she can not do anything at all, she is standing around watching everyone else work, we have said she can do servicing which is not heavy but the atmosphere is awful, she wants to sit in the office and write job cards up, but that is my job, I am not a mechanic or being paid mechanics wages, We know we have to pay SMP for 52 weeks but did not realise we have to pay her for doing nothing for the next 4 months as well, I would never encourage anyone to start their own business, the stress is not worth it,

  6. Tara says:

    Does this apply to the state of georgia also?

  7. dale says:

    @Tara – No idea, sorry. I doubt it, though.

  8. John Maybach says:

    This guy is in cloud cuckoo land. Maternity leave can savage a small business. My operations manager is about to go onto Maternity leave taking with her 50% of our IT expertise and 50% of our management team and its associated skills. That is neither replaceable or tenable. This will work against women in the long run as I for one will not employ a women in a position of authority again. If our business survives the next nine months to a year it will be a miracle. Even if it does we will come out of this a much poorer organisation. Sir Alan Sugar has it right. Don’t under any circumstances employ a women of child bearing age. It is not the money thats an in issue, I would have no worries paying two salaries, but the skills my manager has are irreplaceable and have taken me years to develop with her. I cannot possibly hope to install those values into someone else quick enough to cover her loss. What makes matter worse is I won’t find out if she will be back for at least 11 months. Only a socialist nonsense government could come up with this absolute nightmare. God help us!

  9. Jane says:

    I took over an existing business and under tupe law i took the staff on.
    One of the employees was pregnant and went on maternity leave immediately- when her return was due she handed in her notice and claimed 9 months holiday pay- amazing! but all legal and binding. On the 2nd day of my new business,another member of staff told me she was pregnant and promptly took 6 weeks off sick with one thing and another, returned to work to qualify for smp, left and is now telling me she expects her job to be kept open for her return after one years maternity leave – for a small company employing 5 people it is a nightmare and why when on maternity leave can they not go on holiday? rediculous!!!!

  10. Heidi says:

    Your employee who left on mat leave straight away should not have been entitled to her holiday pay. To keep all her holiday pay she would have to have returned to work for a minimum of 12 weeks (if working full time, longer if returning part time), AND would have to repay any Additional Maternity Pay that had been paid to her (I know as I had to repay a substantial amount to my employer after returning to work for 9 weeks before being offered a new job).

    Dale, thanks for the article, it makes for very interesting reading.

  11. Colin says:

    On a similar vein, a part-time employee recently took maternity leave and informed me that she had all intentions to return after 52 weeks. After 39 weeks she wrote to me giving her planned date of return – 52 weeks from the start of her leave as intended. After 41 weeks I was informed that she had informed ‘friends’ on facebook that she would not be returning to work. These friends informed me and then suggested to her that she should inform me, her employer. She told them that she had no intention of telling me until 8 weeks before the end of her 52 weeks maternity leave. She has now written to me with 8 weeks notice of leaving my employment, so will not be returning to work. She is demanding the holiday pay accrued during her maternity leave – which spans across two pay years. I am unsure as to how much I legally have to pay her. Please advise and let me know where I can find clear written information regarding this to copy or direct her to. She has only been paid statutory maternity pay, not Additional Maternity pay.

    Also – how is a very small employer, like me, who is barely making any profit, able to afford to pay holiday pay to someone on maternity leave? I have had to pay a replacement worker to do her job and of course have had to pay her holiday pay too. All 8 of my employees are women of child-bearing age and if they were all to become pregnant at around the same time, the payment of holiday pay, as far as I understand it, would bankrupt me. Please help!

  12. shivun says:


    I am an owner of a hairdressing salon and employ 90% women. The business has had a very up and down time over the last 5 years due to this very reason.

    The issues businesses face are the accrued holiday during maternity that has to be paid, the maternity pay that is not as far as i am aware , to be claimed on a monthly basis i.e annually. and of course the part time requests on the employee’s return.

    In my experience, I would suggest that all small firms, turn down the offer for flexible hours if there company is very small i.e 5 workers or less. If you are planning on growing and expaning then somewhere along the line the part time hours will cause issues with the expansion plan so its simply not worth it.

    I have 4 part timers in my salon now and its only a matter of time that demand will cause problems with how much money the company can make due to these hours. The staff will have to shuffle the hours or have to go based on a company restructure.

    Bearing in mind that I am too a father, i know that working to live is important and family life. However businesses are there to make profit and should be run with as little emotion as possible. Maternity can finish a business. The government should loose the holiday pay that is accrued on maternity and also allow small business to claim back maternity on a monthly basis to help with cash flow.