Enhanced Maternity Pay: What’s the real cost for employers?

We speak to a lot of business owners who want to support their team through maternity leave but are unsure where to start when it comes to enhanced maternity pay. Some worry they’ll over-commit without understanding the full cost. Others are put off by uncertainty over how it affects cash flow or how to handle it in employment contracts.

To help with that, we’ve put together a free maternity pay forecasting tool (you can download this at the end of the blog) and a short walkthrough video. It gives you a practical way to run the numbers and make informed decisions, whether you’re setting a new policy or reviewing an existing one.

This isn’t about guesswork. It’s about understanding what enhanced maternity pay really means for your business, in pounds and pence.

When the costs really kicks in

In the first six weeks, statutory maternity pay (SMP) is covered at 90% of the employee’s usual earnings and in most cases, you’ll get that back from HMRC. There’s very little cost to you as the employer here, other than a small NI top-up.

But things change quickly from week 7 onwards

SMP drops to £184.03 per week (for 2025/26) for the next 33 weeks, and this is where the real gap opens up, a cliff edge the employee will feel, and you’ll need to consider if you want to cushion the fall.

If you choose to top up their income during this time, say, to 50%, 75% or even 100% of their usual pay, that top-up element becomes a cost to the business. You’ll also pay 15% employers’ national insurance on the top-up, so the cost adds up fast.

How much does enhanced SMP really cost?

Using the calculator, we looked at an example where an employer topped up maternity pay to 50%. The total cash outflow over the year came to £17,500.

Once the corporation tax saving (factored in at 25%) is eventually applied, that net cost falls to around £13,000.

But and it’s a big but, the cash flow timing matters.

You’ll be funding the top-up costs as they arise, whereas the corporation tax saving only comes after your year-end, and in many cases, not until 9 months later. That’s a significant delay and could impact your working capital if not planned for.

Don’t forget your contractual and HR implications

Most businesses that offer enhanced maternity pay have a clawback clause, essentially saying, “If you don’t return to work, we may ask you to repay the enhanced portion.”

It’s a logical inclusion. But enforcing it, especially as a small business, can be difficult and emotionally charged. Unlike large organisations like schools or NHS trusts, the relationship between employer and employee is often more personal.

It’s also worth noting that maternity leave and pay can now be shared between parents, so your enhanced scheme may not only apply to mothers. From a policy and budgeting point of view, this could affect any employee, depending on how parental leave is split.