Unbeknown to many small businesses HMRC has been investigating the possibility of paying Statutory Maternity Pay (SMP) direct to employees rather than requiring employers to pay this out.

However, a detailed study of this has revealed the following :

# In the event that this happened, employers would still be responsible for dealing with the NIC implications of the payments. In the absence of dealing with the gross payments, it might be anticipated that this would place additional complexity on the unsophisticated employer (and indeed many payroll software packages!)

# HMRC would still require substantial data input from employers in respect of each claim, which would be ongoing throughout the period of entitlement. The burden of information provision would be greatest in the lead up to leave commencing.

# The cost savings to employers are estimated at around £1 million per annum, with under half of this sum being available to smaller businesses.

# The set up costs for implementing a system would be of the order of £75 million, with a further £50 million in ongoing costs from year to year.

# No action could be taken forward until 2010 due to existing and currently planned IT projects.

In conclusion, it is Government’s view that the case has not been made for HMRC to assume payment for SMP, and that this responsibility should remain with employers. Instead, a range of support measures, including online calculators, and further material on the Employer’s CD-ROM should help employers cope better with this responsibility.

By Rebecca Benneyworth

For the Pre-Budget report at-a-glance see the: live report.