Statutory Maternity, Paternity and Adoption Pay — An Employer's Guide for Trade Businesses (2026)

Statutory Maternity Pay (SMP)

Statutory Maternity Pay is the legal minimum you must pay an eligible employee who is taking maternity leave. It is paid for up to 39 weeks and is split into two phases:

• First 6 weeks: 90% of the employee's average weekly earnings (AWE), with no upper cap.
• Remaining 33 weeks: the lower of the statutory weekly rate (around £187 in 2026, uprated each April) or 90% of average weekly earnings.

In practice, lower earners often receive the 90% figure for the whole period because 90% of their wage comes in below the standard rate. Higher earners drop to the flat statutory rate after week 6. SMP is treated like normal wages — you deduct income tax and National Insurance through PAYE in the usual way, and it appears on the employee's payslip.

Who qualifies for SMP

An employee qualifies for SMP if they meet two main tests:

• Continuous employment: they have worked for you continuously for at least 26 weeks up to and into the "qualifying week" — the 15th week before the week the baby is due.
• Earnings: their average weekly earnings are at or above the Lower Earnings Limit (the same threshold used to decide whether National Insurance is recorded).

If an employee does not qualify for SMP — for example because they haven't been with you long enough — they may still be able to claim Maternity Allowance directly from the Department for Work and Pensions. In that case you give them form SMP1 explaining why they don't qualify, and they claim from the state instead. You are not out of pocket.

Statutory Paternity Pay

Statutory Paternity Pay is paid to an eligible employee taking paternity leave when their partner has a baby or they adopt a child. It is paid for up to 2 weeks at the statutory weekly rate (around £187 in 2026) or 90% of average weekly earnings if that is lower. The eligibility tests mirror SMP: 26 weeks' continuous service by the qualifying week and average earnings at or above the Lower Earnings Limit. Paternity leave can be taken as a single block or, under current rules, as two separate one-week blocks within the first year.

Statutory Adoption Pay

Statutory Adoption Pay (SAP) closely mirrors SMP. It is paid for up to 39 weeks — the first 6 weeks at 90% of average weekly earnings, then 33 weeks at the lower of the statutory rate or 90% of AWE. It applies to an employee who is the main adopter, or to one parent in a surrogacy arrangement. The other parent or partner may instead take paternity leave and Statutory Paternity Pay. Eligibility follows the same continuous-service and earnings tests as maternity pay.

Shared Parental Pay

Shared Parental Leave lets a mother or main adopter end their maternity or adoption leave early and share the remaining leave and pay with their partner. Statutory Shared Parental Pay is paid at the statutory weekly rate (around £187 in 2026) or 90% of average weekly earnings if lower, for the weeks of leave that are shared. It is more administratively involved than standard maternity leave because both parents' employers may be paying part of the entitlement, but from your reclaim point of view it is recovered in exactly the same way as the other statutory payments.

The Key Point: You Reclaim Most of It

This is the part that turns statutory parental pay from a cash-flow worry into a manageable administrative task. You do not absorb the cost of these payments. Once you have paid an employee their statutory maternity, paternity, adoption or shared parental pay, you recover the bulk of it from HMRC.

• Most employers recover 92% of the statutory parental payments they make.
• Small employers recover 103% — under Small Employers' Relief — and the extra 3% is there to compensate you for the employer National Insurance you pay on top of the statutory amount.

You qualify for Small Employers' Relief if your total Class 1 National Insurance contributions for the previous tax year were at or below the £45,000 threshold. The vast majority of small trade businesses sit comfortably under that figure, so most one-van and small-team firms will be reclaiming 103%, not 92%.

How you actually reclaim it

You don't send HMRC a separate invoice. You recover the money by deducting it from the PAYE liability you would otherwise pay over each month. Your payroll software calculates the recoverable amount, and you report it to HMRC on the Employer Payment Summary (EPS) alongside your normal Full Payment Submission. HMRC then reduces what you owe by the recovered figure. If your recoverable amount is larger than your PAYE bill for the period, the surplus is carried forward or can be refunded.

If you genuinely cannot afford to pay the statutory amount upfront — for example a small firm whose monthly PAYE bill is smaller than the maternity pay due — you can apply to HMRC in advance for funding to cover the payments. HMRC pays you the money so you can pay your employee on time, rather than leaving you out of pocket while you wait to recover it through PAYE.

Quick Reference: Statutory Parental Pay UK 2026

AWE = average weekly earnings. The statutory weekly rate is around £187 in 2026 and is uprated each April. Always check the current figure for the relevant tax year before running payroll.

Notice and Evidence

Your employee must give you proper notice and evidence before you start paying SMP. For maternity, they should tell you at least 15 weeks before the due date that they are pregnant, when the baby is due, and when they want their leave to start. The key piece of evidence is the MATB1 certificate — a maternity certificate issued by their midwife or GP, usually around 20 weeks into the pregnancy. You cannot pay SMP without it. For adoption pay, the equivalent evidence is the matching certificate from the adoption agency.

Keeping the Job Open

An employee on maternity, adoption or shared parental leave has the legal right to return to their job. After ordinary leave (the first 26 weeks) they return to the same role. After additional leave (the further 26 weeks) they return to the same job, or — if that is genuinely not reasonably practicable — a suitable alternative on no worse terms. You cannot make someone redundant or treat them unfavourably because they have taken family leave. For a small trade business this usually means arranging temporary cover — a subcontractor, an agency labourer or a fixed-term hire — rather than backfilling the role permanently.

Holiday Continues to Accrue During Leave

Statutory holiday entitlement keeps building up throughout maternity, paternity, adoption and shared parental leave, exactly as if the employee were still working. They do not lose annual leave by being off. Because someone on a year of maternity leave can accrue a large block of holiday, it is common practice to agree that they take some of it immediately before their leave starts or immediately after it ends. Plan this into your scheduling so you are not surprised by a long holiday request the moment they return.

Statutory Pay vs Enhanced Contractual Schemes

Everything above describes the statutory minimum — the floor set by law. Some employers choose to offer an enhanced (contractual) scheme that is more generous, such as full pay for the first three months. You are free to do this, and a good parental pay package can help a growing trade firm attract and keep skilled staff. The important point for your finances is that you can only reclaim the statutory portion from HMRC. Any enhancement you offer on top — the difference between full pay and SMP — comes entirely out of your own pocket. Decide deliberately whether an enhanced scheme is worth the cost for your business before you write it into contracts.

Record-Keeping

HMRC requires you to keep records relating to statutory parental payments for 3 years after the end of the tax year they relate to. Hold on to:

• The dates of the leave taken
• The payments you made and the weeks they covered
• The amount you reclaimed
• The MATB1 or adoption matching certificate
• Any SMP1 form where you decided the employee did not qualify

Good payroll software keeps most of this automatically, but make sure the supporting certificates are filed somewhere you can find them if HMRC ever asks.

Worked Example: A Small Employer Reclaiming 103%

Imagine you run a small roofing firm. Your total Class 1 National Insurance for the previous tax year was £28,000 — comfortably below the £45,000 threshold — so you qualify for Small Employers' Relief and reclaim 103%.

One month, you pay an employee £750 of Statutory Maternity Pay. Here is what happens:

• You pay the employee their £750 SMP through payroll, deducting tax and NI as normal.
• Because you qualify for Small Employers' Relief, you can reclaim 103% of that figure: £750 × 1.03 = £772.50.
• You report this on your Employer Payment Summary (EPS), and HMRC reduces your PAYE bill for the month by £772.50.

So you paid out £750 and recovered £772.50 — leaving you £22.50 better off, which covers the employer National Insurance you incurred. Over a full 39-week maternity period the numbers are much larger, but the principle is identical: as a small employer you are not financing your team's parental leave, the government is. Your job is simply to pay it correctly, report it on the EPS, and keep the records.

A Note on Getting It Right

The rules summarised here are accurate for the 2026 tax year, but the statutory weekly rate, the Lower Earnings Limit and the Small Employers' Relief threshold are all reviewed periodically — the weekly rate is uprated every April. Always confirm the current figures before running payroll, and if a situation is unusual (an early birth, a stillbirth, overlapping leave, or a TUPE transfer mid-leave) check the specific HMRC guidance or speak to your accountant. Getting statutory pay wrong can leave you under-reclaiming and out of pocket, or over-reclaiming and owing HMRC, so it is worth a five-minute check each time.