Does Maternity Pay for the Self-Employed Need Reforming?

Farida is one of the increasing number of mums who are setting up their own businesses. In fact, mums make up one of the fastest growing groups in all areas of self employment, from start-ups to contracting and freelancing.

Farida Gibbs has been nominated for Muslim Business Woman of the Year twice, winning in 2013 and being a finalist at this year's ceremony in January.

It's one of a number of awards she has won, including the Asian Achievers Awards, the RBS Asian Woman in Achievement Awards and Global Enterprising Woman of the Year Award. She started her recruitment company specialising in technology recruitment in the financial world, now called Gibbs S3, as a single mum from her living room and has built it up through hard graft. It recorded a 52 per cent growth in 2015 compared with the previous year, and total revenue is predicted to be $75m this year.

Farida is one of the increasing number of mums who are setting up their own businesses. In fact, mums make up one of the fastest growing groups in all areas of self employment, from start-ups to contracting and freelancing.

This growth is shining a spotlight on the issue of maternity leave for the self employed. In her recent independent review of self employment, commissioned by the Government, entrepreneur Julie Deane talked about the need for a review of maternity pay.

She said Maternity Allowance, the maternity pay which most self employed women are likely to qualify for [some, who are owners and employees of their business, may also qualify for Statutory Maternity Pay], should be brought up to the same level as that for SMP, that is, that the self employed should get six weeks at 90% of their average salary followed by the statutory rate rather than just the statutory rate of £139.58 or lower. Currently under MA they get 39 weeks at the statutory rate or less.

This would no doubt make things easier for self employed women, many of whom take very brief maternity leaves because maternity pay is not sufficient to allow them to take longer off.

Keeping a business going

Another issue is how women keep their businesses going while they are on maternity leave. Many self-employed women say they risk losing a business they have often spent years developing if they take maternity leave. During maternity leave they are able to work for 10 Keeping in Touch days. However, even if they only work for one hour in a day, that counts as a whole day for the purposes of MA. If they do any paid work outside these 10 days they risk losing their MA.

The rules create a lot of confusion, for example, if you are an artist and sell regularly to galleries and are not planning to work during your maternity leave would the galleries you may have spent years building up a relationship with be able to display and sell paintings you did before you went on leave? Self-employed women are often not able to employ someone to cover their maternity leave, but are not sure if they can get a relative or friend to cover their business for no pay during their maternity leave just to keep it ticking over so they don't have to start again.

Another problem some women encounter is if they claim Small Earnings Exemption. Having an Exemption Certificate means that they are waiving their rights to the full MA and will only get a fraction of the amount. This often comes as a shock to women who have done so without knowing the impact. Currently, unless they revoke the Certificate and start paying their Class 2 National Insurance during the qualifying period for MA they cannot claim the full MA and may end up with just £27 a week. They cannot back date their contributions to correct this after the event. In the Budget the Chancellor announced the scrapping of Class 2 NICs. It remains to be seen how this will impact on Maternity Allowance.

More than one job

Things become even more complicated if a woman has two or more self-employed jobs or a job where she qualifies for SMP and another where she only qualifies for Maternity Allowance, no matter how much she earns and how much she has paid in NI contributions. If she has two jobs and qualifies for SMP in each of them, she can get two lots of SMP. If she has just one job for which she qualifies for SMP and wants to start doing self-employed work she can do this without losing SMP. However, if she does two jobs and only qualifies for MA in one of them she cannot claim both SMP and MA. If she has two jobs for which she qualifies for MA, she can only get one lot of MA and cannot do any other self employed work for more than the 10 KIT days without losing that MA.

It's a system that was designed years ago when there weren't so many women doing self employed work and not nearly as many doing more than one job, a growing phenomenon in the last few years. If, as Julie Deane argues, MA needs to be brought more in line with SMP, should these other anomalies not be addressed too?