Increased flexibility and a better work/life balance are two of the main reasons many independent IT contractors choose to work for themselves. If a growing family is on your horizon, you’ll want to be armed with all the up-to-date info about what maternity and/or paternity packages you can expect to receive. Whether you’re self-employed or work for an umbrella organisation, we’ve researched the key points to remember about maternity and paternity leave for contractors.
If you’re the director of your own limited company, it’s important to remember that you’re classified as an employee and not self-employed (a myth that several agencies seem to buy into.) As such, you’re likely to be entitled to the same maternity/paternity packages as a regular or umbrella employee – potentially including paternity pay and statutory maternity pay or maternity allowance.
SMP for Independent Contractors
Only umbrella employees and company directors can claim PAYE-based statutory maternity pay as independent contractors – self-employed people should apply for maternity allowance instead. To qualify, you must have worked for at least 26 consecutive weeks up to the 15th week before your child is born, and also to have earned a minimum of £111 per week on average. Currently, SMP starts at 90% of your average earnings plus £139.58 per week for the first six weeks, dropping to £139.58 per week for the following 33 weeks.
If you have control over how much you pay yourself in wages, it might be a clever idea to increase your average wages so your 90% is worth more. Remember, though, you could be subject to higher tax and NI in this case, possibly on the SMP too – we’d recommend a chat with your accountant if you’re thinking about this option. Your leave and SMP payments can be dated from 11 weeks before your due date. If you have pregnancy-related complications or your baby is born prematurely, your leave starts automatically from that date instead.
More information on current SMP rates and regulations can be found on the government’s website.
Independent contractors who are self-employed are entitled to MA rather than SMP, provided you can prove you’ve earned more than £30 per week and were employed for a minimum of 26 out of 66 weeks before the birth. MA is frozen at the lower of 90% of your earnings or £139.58 per week until 2017. You can claim this rate for up to 39 weeks, and it’s paid by the government directly rather than through PAYE. After this, the rate goes down to £27 per week for 14 weeks.
Shared Parental Leave
2015 regulation changes have made both maternity and paternity leave for contractors much more flexible for families where both parents work and want to share their leave allowances, at least in theory. If you qualify, the big advantage is that you and your partner are now able to ‘pool’ your allowances – giving you the option to take your leave separately or together. You also have the choice as to whether to take the time in shorter blocks or all in one go. Before these rules were introduced, many men didn’t take anywhere near their full entitlement – it remains to be seen whether the new regulations will change anything.
These guidelines apply to the UK only and do not necessarily apply to non-UK nationals. Clement May Ltd cannot be accountable for decisions made based on the information provided here. You should always speak to your employer and consult government websites.