Statutory Maternity Pay After Resignation: What Employers Need to Know

What Happens to Statutory Maternity Pay (SMP) If an Employee ResignsWe recently had a question from a client whose employee resigned prior to receiving Statutory Maternity Pay (SMP). They asked: Do we still have to pay SMP - It’s a great question, and one that catches many employers out. So, here’s a quick guide to what happens to SMP if an employee resigns before their maternity pay period ends (or in fact in some cases before it's started..)

🎯 The Key Rule: SMP Continues Even After Resignation

If an employee qualifies for SMP, they’re entitled to receive all 39 weeks - even if they resign or their employment ends before that period is up.

In short: once the SMP process has been triggered and the employee qualifies, it must be paid in full, regardless of whether they’re still employed or not.

🧾 What About the P45?

This is where it gets a little more technical. Once the employee resigns, they may ask for a P45. What happens next depends on whether they request one:

• If the employee requests a P45, you’ll issue it on their leave date. Any SMP paid after that will be taxed using a 0T tax code on a week 1/month 1 basis.

  
  

• If the employee doesn’t request a P45, you can continue to apply their current tax code until the SMP ends. Then, you issue the P45 using the date of the final SMP payment.

  
  

Either way, they’re no longer employed in the usual sense, they’re just on payroll for the purpose of receiving maternity pay.

🧮 Lump Sum Option: Tempting but Risky

Technically, employers can pay the remaining SMP as a lump sum. However, this can lead to higher Class 1 National Insurance costs for both employer and employee. Lump sums are treated as one big payment, not as weekly pay spread over time, so NI can be calculated on a much higher figure.

It’s best to think carefully before using this approach. While it might feel “tidier,” it’s not always the most cost-effective option. And as ever, if you have internal policies in place about this, stick to those.

🛑 No Holiday Pay or Employment Rights After Leaving

Once the contract ends, the employee stops accruing annual leave and other employment rights fall away. They are not "on maternity leave" anymore—they are just receiving SMP because they qualified for it before leaving.

⚠️ One Final Note: Working for Another Employer

If the employee starts working for a new employer during their SMP period, they must tell you, because SMP stops for any week in which they do paid work for someone else. But it’s their responsibility to report this to you.

Summary: What Should the Employer Do?

• Continue paying SMP up to 39 weeks, even after resignation.

• Tax correctly depending on whether a P45 is requested.

• Avoid paying a lump sum unless there’s a good reason.

• End holiday accrual and other rights from the contract end date.

• Check for any internal policies on how to handle leavers during SMP.

  
  

If you’ve got an employee resigning while on maternity leave and you're unsure how to process it correctly, don’t guess -ask! It's better to get it right than risk overpaying or underdelivering on legal obligations.

Need help navigating this in your own payroll or for a client? We’re here to help.

Reach out to Austin on austin@yourpayrollmanager.co.uk