Who pays for maternity leave – the government or your employer?

Taking time off work to have a baby can work out expensive, find out who pays for maternity leave with our guide.

Who pay for maternity leave

When you take time off to have a baby, you might be wondering who pays for maternity leave. Is it the government or your employer? You may even be concerned that you’ll have to pay for it yourself.

The answer could, in some circumstances, be all three of these. While the government may pay a base level of maternity pay, your employer can top it up. However, if you want to take the full year off, you’ll likely have to fund the last three months yourself. Knowing how maternity pay is calculated is also key. This will let you know how much you are likely to receive throughout your maternity leave.

Laura Suter, head of personal finance at AJ Bell, says: “This is the money you’ll have to live on while you’re off on maternity leave, so it’s important to work out how much you’ll be taking home and therefore how much you might need to save to supplement it before going off. “The package your company offers can have a dramatic impact on your income and lifestyle while you’re on maternity leave. Some companies will pay six months of full pay, while others will only offer statutory maternity pay, which is around £675 a month.”

It's also worth finding out whether you are eligible for the Sure Start Maternity Grant, which could give you a one-off payment of £500 to help buy all the baby essentials you need as a new parent.

Who pays for maternity leave - the government or the employer?

When it comes to the question of who pays for maternity leave, the answer depends on what kind of maternity pay you are eligible for. The base level of statutory maternity pay (SMP) will be paid by your employer each month, just like your salary. Most working women can claim SMP. Your employer won’t actually foot this bill though - the government covers the cost. Your employer is able to claim the money back from HM Revenue & Customs (HMRC).

However, to attract and retain female employees, some employers will offer an enhanced level of maternity pay. This is over and above SMP. For example, this might be six months on full or half pay.

This is often referred to as occupational or contractual maternity pay. This maternity pay will be paid for by your employer directly. To be eligible for enhanced maternity pay you will often need to have worked for your employer for a specified period of time. This may be, for example, one or two years. If you aren’t eligible for enhanced maternity pay, your employer will pay you SMP, so long as you meet the criteria.

What if I don't qualify for Statutory Maternity Pay?

If you do not qualify for SMP, you may be able to get maternity allowance — a backup form of maternity pay that’s also funded by the government — instead. Sarah Pennells, consumer finance specialist at Royal London, explains: “If you earn less than £123 a week, or you don’t qualify because you haven’t worked for your employer for long enough, you may be able to get Maternity Allowance.” You may also be eligible for Maternity Allowance if you are self-employed or you have only recently stopped working.

Whether you receive SMP or Maternity Allowance, payments will be limited to 39 weeks, which is roughly nine months. This means that if you plan to take the full year off, you’ll need to think about how you will fund the final 13 weeks, or roughly three months, of your maternity leave. Even if your employer pays more than SMP, it would be unusual for you to be paid any maternity pay beyond that 39-week point.

This is where planning ahead can come in handy, and you can think about saving money for the tail end of your maternity leave while you are still working.

Can my employer refuse to pay statutory maternity pay?

If you meet the criteria for statutory maternity pay, your employer must pay it. However, there may be occasions when employers try to refuse. If your employer states that they don’t have the cash to pay your SMP, then you might want to remind them that their costs can be reimbursed through HMRC. They can also apply to HMRC for advance funding if they do not have enough funds to pay you directly.

Alternatively, there could potentially be a quibble over your eligibility. If you have any problems, Gary Wedderburn, an adviser at Acas, the Advisory, conciliation and arbitration service, suggests seeking advice. “If you are eligible for statutory maternity pay and your employer refuses to pay, you can contact Acas for advice. Statutory maternity pay disputes are ultimately resolved by HMRC’s Statutory Payment Dispute Team, but it is recommended that you try to resolve the issue with your employer first,” he explains.

Should you need to discuss your case with HMRC, you can contact its Payment Dispute Team on 0300 322 9422. The team can also help if you think that your employer is paying you the wrong amount of SMP.

What happens to my maternity pay if my employer goes into administration?

If the company you work for is struggling financially, you’ll understandably be worried about what could happen to your maternity pay if it goes into administration. The good news is you should be able to get the SMP you are entitled to, even if the business goes into liquidation. Exactly what happens, however, will depend on the stage of administration the company is at.

Acas' Gary Wedderburn explains: “Up to a point, the employer remains responsible for statutory maternity pay. If and when an employer becomes insolvent, HMRC will pay statutory maternity pay. The Government website contains further information and we advise employees to consult it if they find themselves in this situation.”

Personal finance expert

As well as being a mum, Rachel Lacey is a freelance journalist with more than 20 years' experience writing about all areas of personal finance and retirement planning. After 17 years at Moneywise magazine as both writer and editor, Rachel now writes for a variety of websites and newspapers as well as corporate clients. She is passionate about financial education and simplifying money matters for all.