Maternity Pay for Director?

[bernieburger]

Hi,
We are a small Ltd co. manufacturing business £1-2m TO. One of the directors is currently pregnant and due on maternity soon. Question is for the rest of the directors what is a typical maternity package over and above SMP? Salary is mostly low level with Div top up, so assume SMP will be based on Salary? (90% of this for 6 weeks, before SMP base kicks in).
Would topping up to 90% pay (Salary+Dividend) for 3 months be about right? (Generous enough/affordable enough)

Any advice much appreciated

[randlemarcus]

Surely the right way to do it would be to pay SMP based on the low level salary, but allow the dividend to continue as normal? Reducing the dividend seems unwise, as that's open to a wail about pregnancy discrimination. Equally, "topping up" seems to be the start of a "custom and practice" claim from every other woman working for the company.

[Rufus Stone]

Are you sure SMP applies?

It has a minimum salary requirement. The employee may need to claim maternity allowance direct instead.

[Countdown]

bernieburger said:

Hi,
We are a small Ltd co. manufacturing business £1-2m TO. One of the directors is currently pregnant and due on maternity soon. Question is for the rest of the directors what is a typical maternity package over and above SMP? Salary is mostly low level with Div top up, so assume SMP will be based on Salary? (90% of this for 6 weeks, before SMP base kicks in).
Would topping up to 90% pay (Salary+Dividend) for 3 months be about right? (Generous enough/affordable enough)

Any advice much appreciated

Are you asking what you CAN pay her or what you SHOULD pay her? As she's a Director/Shareholder I assume it's whatever payments she can agree with the other shareholders? If the question is what you "should" pay her why should it not be just SMP?

Apologies if I'm missing something.

[trickywoo]

Unless you are going to alter the shares she’ll still get the same proportion of dividend assuming the other shareholders continue to receive their normal dividends.

That being the case any ‘maternity’ top up may not be relevant or at least minimal in the scheme of things.

[Countdown]

trickywoo said:

Unless you are going to alter the shares she’ll still get the same proportion of dividend assuming the other shareholders continue to receive their normal dividends.

That being the case any ‘maternity’ top up may not be relevant or at least minimal in the scheme of things.

"Dividends" just tend to be a tax-efficient way of getting what is really salary. I can't imagine the other Directors being happy for her to get paid the same amount as them if she's been on maternity leave.

[trickywoo]

Countdown said:

"Dividends" just tend to be a tax-efficient way of getting what is really salary. I can't imagine the other Directors being happy for her to get paid the same amount as them if she's been on maternity leave.

That’s what I’m saying. Unless the plan is to fundamentally alter the share structure or dividends are foregone entirely, for everyone, for the period of mat leave she will by default receive the same dividend ratio as before.

Unless she volunteers to change her shareholding there isn’t much that can be done about that.

[Si1295]

trickywoo said:

That’s what I’m saying. Unless the plan is to fundamentally alter the share structure or dividends are foregone entirely, for everyone, for the period of mat leave she will by default receive the same dividend ratio as before.

Unless she volunteers to change her shareholding there isn’t much that can be done about that.

Unless the they are using an alphabet share structure with altered dividend distribution rights.

[essayer]

You just keep paying her the same salary, no?

[bernieburger]

Thanks for the replies. In essence, Dividends are used as a more tax efficient way of taking 'salary'. So let's assume this director takes a salary of X, given she won't be working, is SMP the norm (90% of Salary for 6 weeks), or would a director of a small business typically have a more generous offer (90% of Salary for 3 months say?).
Wondering if anyone had any experience or anecdotal examples of this situation?
Thanks

[essayer]

A director of a small company would just continue to pay themselves the same, and the company would reclaim whatever SMP they could from HMRC, which is 90% of the average salary between weeks 18-26 of pregnancy (very roughly)

[Countdown]

bernieburger said:

Thanks for the replies. In essence, Dividends are used as a more tax efficient way of taking 'salary'. So let's assume this director takes a salary of X, given she won't be working, is SMP the norm (90% of Salary for 6 weeks), or would a director of a small business typically have a more generous offer (90% of Salary for 3 months say?).
Wondering if anyone had any experience or anecdotal examples of this situation?
Thanks

If it was an Employee then "normal" would be whatever is in their Contract.

For somebody who owns part of the business there isn't a "normal" - it's whatever they want (or can negotiate with the other shareholders).

If you want a "normal" Mat pay level - our company pays full pay for 3 months then half pay plus SMP for 6 months.

[MustangGT]

Si1295 said:

trickywoo said:

That’s what I’m saying. Unless the plan is to fundamentally alter the share structure or dividends are foregone entirely, for everyone, for the period of mat leave she will by default receive the same dividend ratio as before.

Unless she volunteers to change her shareholding there isn’t much that can be done about that.

Unless the they are using an alphabet share structure with altered dividend distribution rights.

This is the key question.

OP?