Small business responsibilities: paternity leave and pay

Welcoming a new member of the family is a big event in anyone’s life. If you’re self-employed, you have to make your own provisions to cover time away from your work. If you employ others, they’re entitled to paternity pay and paternity leave if they and their partner are having a baby (including via a surrogate) or adopting a child.

If you want to know about sick pay, see our guide to statutory sick pay. Read on for more on paternity leave and pay.

Employees can choose to take either one or two consecutive weeks or paternity leave and pay. Leave can start on or after the day of birth, and must finish within 56 days of the birth of the child. There are separate rules for adoption – see below.

How much do you pay them?

Statutory Paternity Pay is either £172.48 a week or 90% of their average weekly earnings, whichever is lower.

How do you reclaim statutory paternity pay or adoption pay?

You can reclaim most, if not all, the statutory paternity or adoption pay that you give your employee from HMRC. Larger businesses can reclaim 92% of the payments.

If you are a small business, and have paid less than £45,000 in Class 1 National Insurance contributions for your employee(s) in the last complete tax year, then you qualify for small employer’s relief, and can reclaim 103% of the costs.

Your payroll each month will show you what you have paid in statutory pay. Some payroll software can calculate how much you can claim back, and produce an ‘employer payment summary’ (EPS) for you to send to HMRC.

You can write to the PAYE Employer Office to ask for a repayment if you cannot set off the payments against the current year’s liabilities. You cannot do this until the start of the next tax year.

Who is eligible for paternity pay and paternity leave?

Employees must:

• be classed as an employee
• earn at least £123 a week
• have worked for you continuously for 26 weeks by the end of the 15th week before the baby is due
• still be employed by you up to the date the child is born
• give you the correct notice (see below)
• be taking time off to look after the child and/or their partner.

What notice must employees give for statutory paternity leave and pay?

At least 15 weeks before the week the baby is due, your employee must tell you:

• the baby’s due date
• when they want their leave to start - they can change this with 28 days’ notice
• how much leave they want.

Employees can ask for leave and pay in writing using the online form. This replaces form SC3. Employees will need to download or print the form after completing it and give you a copy.

Adoption leave and pay

An employee adopting a child must meet the same eligibility criteria as above. The only differences are that they must:

• have worked for you continuously for a period of 26 weeks from the end of the week they were matched with a child (UK adoptions)
• have worked for you continuously for a period of 26 weeks by the date that the child arrives in the UK, or when they want their pay to start (overseas adoptions)
• confirm in writing that their partner is getting statutory adoption pay.

The notice period for paternity pay is 28 days before your employee wants the pay to start. They must send you form SC4 if they are adopting in the UK. For overseas adoptions they need to use form SC5.

Paternity leave can start on the date of placement or an agreed number of days after the date of placement. All leave must be taken within 56 days of the child’s placement or arrival in the UK.