Statutory Maternity Pay for a Company Director

My client is the sole director of a personal service company. She has been a director of that company since February 2021. She started to take a monthly salary of £1000 per month from that company from April 2023. She is due to have a baby on 1 October 2023. Does the fact she has been a director of the company since February 2021 meet the 26 week continuous employment test for SMP?

In this case, the director has not been gainfully employed with some earnings throughout the period from 31 December 2022 up to any day in the qualifying week. So, the director needs a completed form SMP1 to take to Jobcentre Plus to claim Maternity Allowance from the state.

Section 164 of the Social Security Contributions and Benefits Act (SSCBA) 1992 sets out the eligibility conditions for entitlement to SMP. The conditions as per subsection 2 are:

(a)that she has been in employed earner’s employment with an employer for a continuous period of at least 26 weeks ending with the week immediately preceding the 14th week before the expected week of confinement but has ceased to work for him, wholly or partly because of pregnancy or confinement:

(b)that her normal weekly earnings for the period of 8 weeks ending with the week immediately preceding the 14th week before the expected week of confinement are not less than the lower earnings limit in force under section 5(1)(a) above immediately before the commencement of the 14th week before the expected week of confinement; and
(c)that she has become pregnant and has reached, or been confined before reaching, the commencement of the 11th week before the expected week of confinement.

https://www.legislation.gov.uk/ukpga/1992/4/section/164

As per the Statutory Maternity Pay: table of dates for employee entitlement, if the baby is due on 1 October 2023, the latest start date for employment is 31 December 2022

Week baby due
(Sunday to Saturday)
Qualifying week
(Sunday to Saturday)
Latest start date for employment with you (Saturday) Start of 11th week before the week the baby is due Start of 4th week before the week baby is due
1 October 2023 to 7 October 2023 18 June 2023 to 24 June 2023 31 December 2022 16 July 2023 3 September 2023


https://www.gov.uk/government/publications/statutory-maternity-pay-table-of-dates-for-employee-entitlement

As per Section 2 of the Social Security Contributions and Benefits Act (SSCBA) 1992:

Categories of earners.

(1) In this Part of this Act and Parts II to V below—

(a)“employed earner” means a person who is gainfully employed in Great Britain either under a contract of service, or in an office (including elective office) with earnings.

https://www.legislation.gov.uk/ukpga/1992/4/section/2

So, to meet the 26 week continuous employment test for SMP, the director would have had to have been gainfully employed with some earnings from 31 December 2022. She must have been an employed earner throughout the 26 week continuous period from 31 December 2022 up to any day in the qualifying week. You are not gainfully employed as a director until you start to receive some pay from the company.

If the director had met the 26 week continuous employment test, you would then look to see if she had average weekly earnings of at least the Class 1 NIC lower earnings limit (2023-2024 Class 1 NIC lower earnings limit £123) in the relevant period – the 8 weeks prior to the qualifying week. See SPM120200

(The way you calculate average weekly earnings for directors depends on their entitlement to their pay. See the Statutory payments Manual (SPM) guidance on this as SPM171700.)

The HMRC guidance on SMP and continuous employment for SMP is at
https://www.gov.uk/employers-maternity-pay-leave
https://www.gov.uk/hmrc-internal-manuals/statutory-payments-manual/spm120000
https://www.gov.uk/hmrc-internal-manuals/statutory-payments-manual/spm250000

The Maternity, Adoption and paternity calculator for employers is at:
https://www.gov.uk/maternity-paternity-calculator


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Vanessa worked for HMRC for 30 years. She began her career with HMRC in the processing/service office. From 2001 Vanessa was a Compliance Caseworker within Small and Medium Enterprises. Vanessa visited a wide range of employers and contractors to check that they were meeting their tax and National Insurance (NIC) obligations with regard to payroll, expenses, benefits and the Construction Industry Scheme (CIS).

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