Preparing for Maternity Pay

I am now a couple of months away from becoming a first time Mum, and as much as I am SO excited for this new stage in our lives, I also feel like I am scrambling to get things organised and ready. One of those things included being prepared for a drastic pay cut once I start maternity leave.

We made the decision that we want me to have as much time as possible with our baby at home, which in the UK is 12 months/52 weeks, plus 1 month to take your accrued annual leave. As much as this is great, there will be at least 3 months of no pay whatsoever, and the rest of the months are nothing in comparison to my original pay.

So cue the planning! I had to get out my spreadsheet and literally plan how we would financially survive on reduced pay for 12 months. One of the most important parts of planning maternity leave is figuring out what you're entitled to in terms of pay.  So let's have a look:

Statutory Maternity Pay (SMP) and Maternity Allowance
SMP is the standard payment package for eligible employees during maternity leave (information on eligibility is available here).
SMP offers 90% of one’s weekly average earnings in the first six weeks, and £156.66 per week or average weekly earnings (whichever is lower) for the next 33 weeks.
Do remember that taxes and national insurance still get deducted on SMP (I don't think this is fair!), as will any pension contributions made before starting maternity leave unless you specifically opt-out.

For employees who are not eligible for SMP, or for those who are self-employed, a very similar package exists called maternity allowance, where you would receive 90% of one’s weekly average earnings or £156.66 per week (whichever is lower) for a total of 39 weeks.

For both SMP and maternity allowance, the final 13 weeks would be unpaid if a mother decides to take the full 52 weeks she’s entitled to.

Enhanced Maternity Pay
Some companies go a step further than SMP (thankfully!) and offer their employees enhanced maternity pay. These maternity packages are at a company’s discretion and can vary widely between businesses, but this is something you should definitely consider when looking at a company's package.

For example, I get 50% pay + SMP for 6 months of maternity leave which is significantly better than just receiving SMP, so do make sure to check what you would be entitled to.

Other income sources during maternity leave
Child benefit is a payment made by the Government of £21.80 per week for the first/eldest child, and £14.45 per child for any additional children. This payment can be claimed soon after the baby is born, and will be paid all the way up until the child is 16, or until they leave formal education.

Those who live in a household where one person earns more than £50,000, child benefit will be reduced. For those who earn more than £60,000, all of the child benefit would be lost through tax, if claimed.

For mothers on lower incomes, there are programs such as the Sure Start maternity grant which offers a one-time £500 payment upon a child’s birth to help with costs. Universal credit is also available to those who qualify.
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Lastly, employees have the option to work for up to 10 days during their maternity leave, through an initiative called ‘keeping in touch days.’ These days of work are paid in full and do not have an impact on maternity leave payments.