How Do I Reclaim Statutory Maternity or Paternity Pay

Statutory maternity pay and statutory paternity pay ensure that employees receive financial support when they take time off to care for a new baby. For many small businesses the cost of these statutory payments can feel significant, especially if cashflow is tight. The good news is that HMRC allows employers to reclaim most, and sometimes all, of the statutory pay they issue. The process is straightforward once you understand the rules.

This article explains who qualifies, how much you can reclaim, when you can reclaim it, how to apply, what paperwork you must keep and how to handle issues like cashflow problems or reclaiming before you pay the employee. Whether you run a limited company, small charity, community group or start up this guide will help you understand the full process.

Understanding Statutory Maternity Pay and Statutory Paternity Pay

Before looking at how to reclaim, it helps to understand the basics.

Statutory maternity pay (SMP)

Employers must pay SMP to eligible employees for up to 39 weeks. SMP rates are set by the government and include:

• the first six weeks at 90 percent of the employee’s average weekly earnings

• the remaining 33 weeks at the government standard rate or 90 percent of average earnings, whichever is lower

SMP is paid through payroll and must be reported to HMRC via Real Time Information.

Statutory paternity pay (SPP)

SPP is paid to eligible employees for either one or two weeks. The rate is the lower of the government standard rate or 90 percent of average weekly earnings.

SMP and SPP are statutory rights which means an employer must pay them if the employee qualifies.

The key point is that employers do not usually bear the full cost. They reclaim the statutory element from HMRC.

How Much Can Employers Reclaim

The amount you can reclaim depends on your size and your total employer National Insurance contributions from the previous tax year.

There are two rates of reclaim:

1. Standard reclaim (92 percent)

Most employers can reclaim:

• 92 percent of SMP

• 92 percent of SPP

This applies to employers who do not qualify for Small Employers Relief (SER).

2. Small Employers Relief (103 percent)

If your employer National Insurance contributions for the previous tax year were £45,000 or less, you qualify for SER.

This means you can reclaim:

• 103 percent of SMP

• 103 percent of SPP

This covers the full statutory amount plus an additional 3 percent to help with administration costs.

Small businesses, charities and community groups often qualify for this enhanced rate.

How the Reclaim Process Works

Reclaiming SMP and SPP is done through your payroll software and HMRC systems. The process is the same for all employers.

There are two main routes:

• reclaim through payroll submissions (most common)

• reclaim via the employer’s PAYE account if manual correction is needed

Your payroll software handles most of the mechanics automatically.

Step 1: Record Maternity or Paternity Pay in Payroll

The reclaim process begins the moment you enter SMP or SPP into your payroll software.

Payroll software will:

• calculate the correct SMP or SPP

• show the amount reclaimable

• include the reclaim in your Employer Payment Summary (EPS)

• reduce your PAYE and NI bill

• notify HMRC through RTI submissions

You do not need to make a separate claim form. HMRC processes the reclaim from the monthly or quarterly EPS submission.

Step 2: Submit an Employer Payment Summary (EPS)

The EPS is the key part of the reclaim process.

Your EPS must include:

• the amount of SMP or SPP you have paid

• the amount you are reclaiming

• whether SER applies

• adjustments to your monthly PAYE bill

Every time you run payroll during the period when SMP or SPP is being paid your payroll software should automatically prepare an EPS showing the reclaim.

Once submitted HMRC updates your PAYE account to reflect the reduced liability.

Step 3: Pay Less PAYE and NI

After HMRC processes your EPS reclaim your PAYE bill reduces by the refund amount.

For example:

If your monthly PAYE and NI liability is £2,500 and you reclaim £1,800 in SMP you must pay HMRC only £700 that month.

If your reclaim exceeds your PAYE bill the balance becomes a credit.

This credit can be:

• carried forward to offset future liabilities

• refunded to you by HMRC

You decide what suits your cashflow.

Step 4: Request a Refund if Needed

If your SMP or SPP reclaim is greater than your PAYE and NI bill HMRC owes you money. You can either leave it on your account or request it back.

Refunds can be requested:

• through your PAYE account

• by asking HMRC directly

• through your accountant

• using the PAYE helpline if online reclaim is not possible

Refunds usually take one to three weeks depending on HMRC processing times.

Reclaiming Before You Pay Employees: Advance Funding

Sometimes employers do not have enough cashflow to pay SMP or SPP upfront. HMRC supports small employers through advance funding.

What is advance funding

Advance funding lets you receive the reclaim before you actually pay the statutory payment to the employee. This avoids cashflow strain.

How to request advance funding

You must apply directly to HMRC using the SPP1 or SMP1 advance funding process. You can:

• apply online through your PAYE account

• call HMRC to request form guidance

• submit details of the expected SMP or SPP

HMRC will send the funds directly to your business bank account.

Who uses advance funding

This is most helpful for:

• small charities

• small community groups

• micro businesses

• companies with inconsistent cashflow

The process is straightforward and does not affect future reclaims.

What Records Employers Must Keep

HMRC requires employers to keep detailed records for at least three years after the end of the tax year in which SMP or SPP was paid.

You must keep:

• proof of the employee’s eligibility

• written notice of pregnancy or birth

• dates of leave

• proof of statutory payment calculations

• payroll records showing SMP or SPP

• reclaim amounts and EPS submissions

• details of any advance funding received

These records help protect you if HMRC carries out an audit.

How to Handle Errors or Corrections

Mistakes happen. If the wrong amount of SMP or SPP is claimed you can correct it.

If you claimed too little

Adjust your next EPS to claim the remaining amount.

If you claimed too much

Submit an EPS adjustment reducing the reclaim. HMRC will correct your PAYE account.

If the error crosses tax years

Your accountant may need to handle it manually through HMRC’s correction process.

HMRC rarely penalises genuine mistakes as long as you correct them promptly.

Special Scenarios Employers Should Understand

1. Director employees receiving SMP or SPP

Directors who pay themselves through payroll can qualify for SMP and SPP. You reclaim in the same way as with any other employee.

2. Zero hours employees

If they meet earnings and service requirements they can receive SMP or SPP. Reclaim applies normally.

3. Employees who leave employment

You can still reclaim SMP. It continues even if the employee no longer works for you.

4. TUPE transfers

When staff transfer between employers the obligation to pay and reclaim may transfer too. You must check the transfer agreement.

Real World Examples

Example 1: Small business using Small Employers Relief

A small company pays £10,000 in employer NICs in the previous tax year. The director pays an employee £5,000 in SMP. The company reclaims 103 percent, receiving £5,150 back from HMRC.

Example 2: Charity reclaiming through EPS

A community charity pays £1,800 in maternity pay in June. Its PAYE liability is £1,200. The charity submits an EPS, reducing its June PAYE bill to zero and carrying forward a £600 credit.

Example 3: Employer with cashflow problems

A small shop cannot afford to pay £3,000 SMP upfront. It applies for advance funding. HMRC transfers the money to the business account within ten days.

Example 4: Director on payroll

A director working in her own limited company qualifies for SMP based on earnings. The company pays SMP then reclaims it through payroll submissions.

Common Mistakes and How to Avoid Them

Mistake 1: Forgetting to submit an EPS

Without an EPS HMRC will not process your reclaim. Always check that payroll software sends it.

Mistake 2: Paying SMP or SPP incorrectly

Always use payroll software. Manual calculations lead to errors.

Mistake 3: Not using Small Employers Relief

Many small employers do not realise they qualify for 103 percent reclaim.

Mistake 4: Not keeping records

HMRC can demand repayment if documentation is missing.

Frequently Asked Questions

Do I need to reclaim SMP and SPP manually?

No. Payroll software and EPS submissions handle it automatically.

Can I reclaim enhanced maternity pay?

No. Enhanced or contractual maternity pay cannot be reclaimed.

Can I reclaim if the employee does not return to work?

Yes. SMP and SPP are not affected by the employee’s return.

Can I reclaim Shared Parental Pay?

Yes. It follows the same reclaim process.

Can a voluntary organisation reclaim SMP and SPP?

Yes. Charities and community groups reclaim in the same way as businesses.

Conclusion

Reclaiming statutory maternity pay and statutory paternity pay is straightforward once you understand the process. Employers reclaim most or all of the statutory amount through their payroll submissions, usually by submitting an Employer Payment Summary. Small employers can reclaim up to 103 percent under Small Employers Relief which reduces costs significantly.

If cashflow is tight advance funding is available from HMRC which means you can receive reimbursement before paying the employee. The key tasks for employers are to run payroll correctly, submit accurate EPS returns and keep clear records.

Understanding this system ensures your business or charity remains compliant, protects your cashflow and supports your employees during important life events.