Maternity Pay Guide for Company Directors

Maternity benefits are always available to women who go through maternity leave in the UK. Although the benefits solely depend on your position at your company. It also depends on the type of maternity benefit you're claiming. There are two different types of maternity benefits available for workers in the UK but only one of these benefits can be received at a time.

As a director of a private limited company, you may be entitled to both of the maternity benefits available for pregnant women in the UK. However, the type of benefit will depend on some factors. These factors include:

1. If you're the sole director or sole shareholder of your private company
2. If other directors are available in the company to take your position in operating the company in your absence
3. If you're employed as a director in a company and you're not a shareholder
4. The annual income of the business and the size of the business

Even with all of the above factors, all pregnant women in the UK are entitled to a 52-week total of maternity leave from work. The 52 weeks of maternity weeks is divided into two;

1. The ordinary maternity leave which is 26 weeks; and
2. The additional maternity leave which is 26 weeks

Types of Maternity Benefits

Maternity benefits are divided into 2 and only one can be achieved at a time. The type of maternity benefit to be received by a person depends on:

1. Whether the person in question is the sole director and shareholder of their company or just an employed director in the company
2. Whether the company has other directors that can fill in for the director during their absence
3. Whether you're a shareholder or an ordinary employed director at the company.

The two types of maternity benefits are

1. SMP (Statutory Maternity Pay) and
2. MA (Maternity Allowance)

Statutory Maternity Pay (SMP)

There are two criteria necessary for qualification for Statutory Maternity Pay: the rule of continuous employment and the rule of earnings.

Additionally, you must also provide evidence of your baby's due date and a preferable date for your SMP to start with your employer. Without these, you cannot be granted an SMP.

For a director to qualify for the continuous employment rule of the SMP, you must have been working with or directly employed by your current employer or company or you might be working through an employment agency with your current company for at least 26 working weeks. This must be up to 26 weeks at 15 weeks before your baby's due date.

You must also have a gross weekly income of at least £123 which is the current Lower Earnings Limit for the National Insurance purposes for weekly pay for the 2024/25 tax year.

Once you are qualified for the Statutory Maternity Pay, you are entitled to a total of 39 week's pay from your employer. Although the pay will not remain the same throughout your maternity leave; in the first 6 weeks of your maternity leave, you should be paid 90% of your normal weekly income and for the remaining 33 weeks of your leave, you will be paid of £184.03, which is the standard weekly rate.

As a sole shareholder and sole director of your company, you might find it difficult to pay your Statutory Maternity Pay by yourself except there are other employees that can keep the business running and be able to generate income that will be enough to pay your SMP.

Apart from paying your SMP, you must be able to pay the salaries of your employees who will be available to run your company in your absence and if you're appointing another director to run the business, you must be able to pay the director their salary during the time they occupy that position.

Maternity Allowance (MA)

If you do not match any of the criteria for SMP qualification, or you're a sole trader or sole shareholder of your company and cannot pay yourself the Statutory Maternity Pay, you might be eligible for the Maternity Allowance. Criteria for qualification for the Maternity Allowance include

• You're in employment with an organisation which includes being a director of your own company and you're not eligible for SMP
• If you are not employed you are self-employed and paying the class 2 NIC or you're holding a Small Earnings Exception Certificate.
• If you were recently employed or self-employed
• You're not employed or self-employed but participate in the business of your spouse or civil partner that is self-employed

If you have been previously employed, or you were previously self-employed, you can receive the Maternity Allowance for a maximum of 39 weeks only. Your employment must be at least 26 weeks. Your 39 weeks Maternity Allowance and your 26 weeks of work with that employer, must be within the 66 weeks test period which also includes the week your baby is due.

Your total average weekly earnings must be up to or greater than the earning threshold for Maternity Allowance which is £30 weekly. To calculate your average weekly earnings, you have to take an average of your 13 week's earnings during the test period. After it is worked out, then the amount you will receive for your Maternity Allowance will be 90% of your total average weekly earnings and must not exceed £184.03 weekly as this is the maximum for Maternity Allowance.

Conclusion

All members of the UK are entitled to maternity leave and during the first few weeks, the person is to be paid more than 80% of their total average weekly earnings depending on the structure of the maternity benefit obtained by that person.

The maternity benefits are two but only one can be gotten at a time. Also, certain criteria must be met for someone to qualify for any of these maternity benefits. As directors of a limited company, and as the sole shareholder or sole director of your company, you can only be entitled to one of the benefits which is the Maternity Allowance. Do you have any questions about maternity pay for company directors? Kindly contact one of our experts for help today.