Maternity pay from small company

[timlinsell]

Hi,

I hope you will be able to offer some advice!

I own a very small limited company, along with a friend, we own 50%
each. Turnover is very small - £10-20k p/a. We have no payrolled
emplyees (we run everything ourselves in our spare time), last year,
we paid a dividend to ourselves.

Last year, my wife, who was a teacher, gave up work to be a full time
mum. She is now going to do the bulk of the work for the company, the
plan is that the company will pay her.

We will hopefully have a second child in the next year or so. I would
then like for her to claim maternity pay. So my question is, what is
the easiest way to set this up, what paperwork will I need to do, and
what and for how long should the company pay her to maximise the
maternity pay.

Thanks in advance for your help.

Tim

 

[PeterSaxton]

Hi,

I hope you will be able to offer some advice!

I own a very small limited company, along with a friend, we own 50%
each.  Turnover is very small - £10-20k p/a.  We have no payrolled
emplyees (we run everything ourselves in our spare time),  last year,
we paid a dividend to ourselves.

Last year, my wife, who was a teacher, gave up work to be a full time
mum.  She is now going to do the bulk of the work for the company, the
plan is that the company will pay her.

We will hopefully have a second child in the next year or so.  I would
then like for her to claim maternity pay.  So my question is, what is
the easiest way to set this up, what paperwork will I need to do, and
what and for how long should the company pay her to maximise the
maternity pay.

Thanks in advance for your help.

Tim

The HMRC website will give you all the information. The company will
need to register as an employer.

 

[timlinsell]

Thanks. I had checked that but had got a little confused to be
honest.

From what I can see, my wife needs to be working for 26 weeks into the
15th week before the baby is due. Payment can start from 11 weeks
before due date, so she needs to be paid for 30 weeks.

Earnings are calculated as the average of 12 weeks pay. Payment is
117.18/week, max of 90% earnings, meaning she would need to earn
130.20
over the 12 weeks period.

Does the 12 weeks pay need to be the same as the other 18 previous to
it, or can they be lower? Will the company/she need to make any
NICs? Apologies if I'm asking obvious questions but I don't really
know much about employment rules!

Thanks again,

Tim

 

[PeterSaxton]

Thanks.  I had checked that but had got a little confused to be
honest.

From what I can see, my wife needs to be working for 26 weeks into the
15th week before the baby is due.  Payment can start from 11 weeks
before due date, so she needs to be paid for 30 weeks.

Earnings are calculated as the average of 12 weeks pay.  Payment is
117.18/week, max of 90% earnings, meaning she would need to earn
130.20
 over the 12 weeks period.

£130.20 per week not over the 12 weeks.

Does the 12 weeks pay need to be the same as the other 18 previous to
it, or can they be lower?

It can be lower but what's the point?

 Will the company/she need to make any
NICs?  Apologies if I'm asking obvious questions but I don't really
know much about employment rules!

Both will have to pay NICs.

 

[timlinsell]

On 20 Aug, 20:52, (e-mail address removed) wrote:> Thanks.  I had checked that but had got a little confused to be



£130.20 per week not over the 12 weeks.


It can be lower but what's the point?


Both will have to pay NICs.

Thanks Peter. The 12 weeks I mentioned was what I thought was used to
calculate the level of SMP - average of the last 12 week's pay x 90%.
The question about lower was, could I , for example, pay my wife £5 a
week for the first 18 weeks, then £130.20 for the final 12, and then
for her to receive SMP of £121 for the full length of her maternity.
Point being, it costs my company less to pay her. Along the same
lines, is there a minimum pay to require NICs paid, if so, is that a
minimum she will need to be paid for the first 18 weeks?

Thanks in advance,

Tim

 

[Tim]

... could I , for example, pay my wife £5 a week ...

Will she work less than an hour per week?

 

[PeterSaxton]

Thanks Peter.  The 12 weeks I mentioned was what I thought was used to
calculate the level of SMP - average of the last 12 week's pay x 90%.
The question about lower was, could I , for example, pay my wife £5 a
week for the first 18 weeks, then £130.20 for the final 12, and then
for her to receive SMP of £121 for the full length of her maternity.
Point being, it costs my company less to pay her.  Along the same
lines, is there a minimum pay to require NICs paid, if so, is that a
minimum she will need to be paid for the first 18 weeks?

Thanks in advance,

Tim

Is she a director?

Are you paying her below minimum wage legislation?

Except for a little bit of NICs the money is just going round and
round. There's tax charged on the income and tax reduced due to the
expense.

 

[timlinsell]

Is she a director?

Are you paying her below minimum wage legislation?

Except for a little bit of NICs the money is just going round and
round. There's tax charged on the income and tax reduced due to the
expense.- Hide quoted text -

- Show quoted text -

No, she's not a director.

She will be paid minimum wage I suppose.

I thought the SMP was funded from the government though - that's the
money that is extra and what I would be planning around.

 

[PeterSaxton]

No, she's not a director.

She will be paid minimum wage I suppose.

I thought the SMP was funded from the government though - that's the
money that is extra and what I would be planning around.-

I was meaning the normal wages.

 

[ManBearPig]

No, she's not a director.

She will be paid minimum wage I suppose.

I thought the SMP was funded from the government though - that's the
money that is extra and what I would be planning around.

I doubt it. The government doesn't fund anything if there's a business
they can stick it to instead.

 

[redmelons]

I thought the SMP was funded from the government though
<
http://www.hmrc.gov.uk/employers/employee_pregnant.htm#18>

"Recovering SMP/SPP
How much do I get back?
The amount you get back normally depends on your total gross,
employers' plus employees?, Class 1 NICs in the appropriate tax year.

If your annual liability for Class 1 NICs is £45,000.00 or less you
are entitled to 100 per cent of the SMP/SPP"

 

[Andy Pandy]

Along the same
lines, is there a minimum pay to require NICs paid, if so, is that a
minimum she will need to be paid for the first 18 weeks?

She needs to be paid at least the LEL, currently £90 a week, to get NI benefits
including SMP. I think it needs to longer than for 18 weeks but I can't
remember.

If you pay her an amount somewhere between the LEL (£90) and PT (£105), then
there is no NI to pay by either employee or employer, no tax either unless she
has other income (it's within the personal allowance), but she will qualify for
NI benefits like SMP, SSP, JSA etc.

Make sure she's actually doing work to the value of what you pay her, otherwise
you may have problems.

http://www.hmrc.gov.uk/rates/nic.htm