Self-Employment During Your Maternity Pay Period

Many mums get their inspiration to become self-employed whilst on maternity leave, and a large number will go on to have more children, after they have set up their business. But are you aware of the rules regarding self-employment during a maternity pay period? In follow-up to her previous article “Self-employed? Protect your right to maternity allowance” Frances Weir (left) from bigbooklittlebookcardboardbox – a green affordable children’s bookcase, designed to encourage an early love of reading – today looks at earning from self-employment during your maternity pay period.

The rules from the Department of Work and Pensions (DWP) regarding working during a maternity pay period differ according to the type of maternity pay you are in receipt of.

The good news for brand new mums wanting to set up in business is that you can earn money from self-employment while in receipt of Statutory Maternity Pay (SMP) from an employer. The DWP website states “If you do any work in a self-employed capacity during your maternity pay period, then such work will not affect your SMP”. Just check that your contract of employment does not prohibit self-employment as you’re still classed as ‘employed’ when on maternity leave.

…if you are in receipt of maternity allowance you can’t do any work during your maternity pay period, other than 10 Keeping In Touch days

The not-so-good news is that if you are in receipt of maternity allowance (MA) (either because you are self-employed, or you do not qualify for SMP from your employer), you can’t do any work during your maternity pay period, other than 10 Keeping In Touch (KIT) days. KIT days are designed to allow you to maintain contact with your business when on maternity leave. They are not formally monitored, but the rules are clear – “If you work for more than 10 [KIT] days you must not collect any more [MA]”. And annoyingly, you can’t break down the 10 days into smaller chunks of time – “Any work you do as a KIT day, even as little as half an hour for example, will be counted as a whole day for KIT days”.

Andrea Dobson

So what are the options for self-employed sole traders who want to claim MA? You’re still allowed to draw an income from your business while receiving MA – you’re just not allowed to do the work yourself. So, Andrea Dobson from Cheap Accounting advises that there are two main options: “If you are a sole trader, you can change your business structure to a partnership by adding a partner (a friend, a spouse), who could then run the business. A partnership should not be entered into lightly. Unlike shareholders in a limited company, partners in a general partnership have no financial protection if the business runs into trouble – each partner is responsible for the debts of the business as a whole. Also, disputes between partners can cause difficulties so it is a good draw up a deed of partnership in advance and get legal advice on the level of responsibility within the deed – especially in this scenario when one of you would not be working but still drawing an income. The partnership would need to be registered with HMRC and a partnership tax return would need to be completed which shows how the profit is split between partners. Each partner is then responsible for paying tax on their share of the profits”.

The other alternative is to employ someone to run your business during the maternity period. “Becoming an employer is a big step for a small business” says Andrea, “You would need to set up a payroll to allow for national insurance and tax contributions and you would have to meet the minimum wage and all relevant health and safety legislation”.

After looking into the costs associated with both these options, many mums decide either to forgo the MA to keep running the business, or choose to close their business for the maternity pay period.

There is a potential third way, but it is totally at the discretion of the job centre that administers your MA. The DWP website states. “If you work for more than 10 [KIT] days you must not collect any more money. A decision maker, trained in applying social security law, will decide whether any further payments can be made, but you will lose MA for at least the number of days you work over the 10 days allowed.” So, in theory at least, it’s possible (with a sympathetic job centre) to work a couple of days a week on your business, but lose pro-rata some of your MA. My local job centre was unable to tell me how this guidance would be applied in practice; they said it would be assessed on a case-by-case basis – if anyone has any experience of this then please do add a comment below.

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Comments

  1. Wow, thats really business friendly. If you are a “one woman band” who just wants to keep things ticking over for a year you have little chance.

  2. Thank you so so much for these really helpful articles.
    I was employed when I had my son in 2007, but am now self-employed and thinking about whether to have another!
    I have just had a letter to renew my small earnings exception certificate and after reading the DWP website was of the impression I could renew it and pay voluntary class 2 contributions and get the full amount of MA – big mistake! Will now not renew it and just pay instead so thank you so much for saving me £3000+!
    This article has really got me thinking though, I don’t think my business will survive with only 10 days input! So if I want to have a job to go back to I’ll have to plan this very very carefully. After all, employing someone will probably be even more work! Seems rather unfair on work-from-home mums doesn’t it?!

  3. Hi Kerrie, I’m really glad we were able to save you thousands of pounds and that you found out in time! This is a trap that many self employed women must fall into. I agree, it’s really hard on mums who want to keep their businesses ticking over while spending time with their babies.

  4. Stacey-Marie says:

    Hi Helen, I have just come across this thread after many hours researching and reading up all about being self employed and maternity allowance as I’m self employed and are starting to think about babies, but want to check and be prepared (as much as can be!)… So far my hubby and I have gathered the following points:
    1. As long as you have been paying class 2 NI for 13 weeks in the 66 week test period, then you will receive the full MA alowance for up to 39 weeks
    2. You don’t have to provide proof of earnings as they take it that you are earning the minimum due to paying the class 2 NI
    3. You are allowed 10 KIT days in the 39 week period of MA being paid

    Are these correct? The thing we are totally confused about is with regard to the KIT days…We are really confused about what they mean to a self-employed woman! I run a business where i don’t make any turnover unless i win client business (also a lot of that turnover stays in the business), so for example i may respond to an enquiry, have a consultation and write a proposal for potential client business, all of which will take up to 2 of my KIT days, they then decide to go ahead and book my services and pay me a deposit. I then may work a few KIT days for this client, but the majority of the work may not happen until after the 39 week MA period (business can have long lead times). At the same time I will have existing clients from before MA started, so any work i do on this, even if no money is being paid to me as it will have already been paid prior to MA, will be classed as KIT days? How is all of this proven? The deposits I get paid can be fairly substantial, so are these payments taken into account when i do my tax return and then questioned? Is it doing the work or receiving the money that is the problem? It is quite unclear and very confusing about how we can survive as small businesses…if i left my business for 9 months it wouldn’t survive, i would have to start all over again with market presence and exposure, but by the same token if i just kept the business ticking along doing more than the allowed 10 KIT days i still may not get any clients and earn no money (business is quite irratic), but yet foreit the MA payments…? So would even the odd email, responding to requests for press, blogging etc in order to keep market pressence be classed as part of KIT days even though no direct earnings come from that? CONFUSED! 🙁

    Sorry for the complete waffle! And thank you so much for any thoughts and help!

  5. Hi Stacey-Marie

    Your three points are correct!

    Being restricted to Keeping In Touch days are a real problem for self-employed mums.
    A few thoughts:
    (1) KIT days aren’t officially monitored – it’s up to you to declare them.
    (2) There is no problem with earning whilst receiving MA, it’s just working (other than KIT days) that is prohibited. If you had a business model that provided an income without involving any work (e.g. through affiliate links to amazon etc) then that wouldn’t affect your MA.
    (3) Work is still work even if you don’t get any direct earnings from it – so (business) blogging, responding to press requests etc would count towards your KIT allowance.
    (4) The job centre has the discretion (but not obligation) to allow you to do some work during your Maternity Pay Period and reduce your MA pro rata accordingly (i.e. if you get a week’s work for a client, you would lose that week’s MA), so you might consider speaking to them now, to get an indication of how sympathetic they would be to this.

    I hope this helps a little – at the end of the day, the benefits system has always relied on the conscience of the claimants. Answering a work-related email after you have ‘used up’ your 10 KIT days is benefit fraud. But anecdotally, I know that many mums would stick to the spirit of the law rather than the letter.

  6. Stacey-Marie, I’m afraid I’m not an expert on this so I asked Frances, who wrote the original article, to stop by and give her opinion. I hope you found it helpful!

    Frances, thanks once again for your wise words!

  7. Stacey-Marie says:

    Thank you Helen for asking Frances to answer my questions : )

    Thank you so much Frances for clearing a lot up! Everything we had read previously made it all a little grey, your advice has answered the questions we had! Thank you for taking the time to respond! 🙂

  8. You’re welcome Stacey-Marie. I wondered if you might find this article useful too? http://businessplusbaby.com/2011/02/21/self-employed-and-thinking-of-starting-a-family/

  9. How on earth is it meant to work when you are running an internet business? You cannot close it down completely as you will lose any good google and search engine placements and ranking that you have spent a lot of time building up. Surely there must be a way?

    • I know, it’s infuriating, isn’t it? The only solution I can see is to outsource everything. Not ideal, I know, but you’re allowed to draw money from your business – you’re just not allowed to do the work yourself. There are lots of mums out there who I’m sure would be your customer services department for a reasonable fee – answering questions, doing postal runs etc. You could use your KIT days to do anything you couldn’t outsource. You might only just break even, but at least it would keep your business ticking over while you’re on maternity leave?

      Note: If you do employ someone else to do the work, note that it’s your responsibility to decide whether they are self employed or employed. See the HM Revenue and Customs website for more on this http://www.hmrc.gov.uk/employment-status/index.htm. If you treat them as self employed and the HMRC consider they are actually your employee instead, you’ll be liable to pay tax and NI as an employer.

  10. I’ve been looking for an explanation for the self employed maternity allowance for ages, this is the first understandable and helpful info I have found, thanks for writing it. Its ridiculously unfair you can start a business and work/earn as much as you want while receiving SMP, but SMA you get nothing. So much for the government wanting to help small businesses.

    I work freelance and run 2 small online businesses as well, am going to have to think carefully about where to spend my 10 kit days. Possibly might have to transfer biz name to my husband too. I’m lucky to have another income coming in – things will still be very very tight for us, but how on earth is a single parent running their own business supposed to survive on 10 working days?

    One question if you could help. Why do KIT day count as working days, rather than days you are earning? Surely if you don’t have the money coming in and are just blogging/doing admin/sending emails etc it doesn’t matter? Thanks

  11. Hi Susan, glad you found the article useful!

    Maternity Allowance is designed to allow you to recover from birth and devote your time to looking after your new baby, rather than having to work. So in essence the government are paying you the money to compensate for the loss of earnings due to you being otherwise engaged raising the next generation (of tax payer!). I’ve no idea why there is a loophole allowing recipients of SMP to do self-employed work during their maternity pay period, I would have expected the policies to be consistent.

    I agree the MA KIT day policy doesn’t allow for the fact there is down-time with a baby, where you can easily do the admin/blogging you’ve described without it adversely affecting the care you give your baby. If you are not bringing in any money from such ‘work’, then it’s hard to see that anyone could consider this fraudulent, and I expect most mums would take a pragmatic view in this scenario.

  12. Is getting family and friends to do voluntary unpaid work to keep your business ticking over allowed to get over the issue of not doing actual work yourself?

  13. I’d like to know the answer to Yasmin’s question too!

  14. Hi Yasmin and Jill, I’ve just checked with Frances and I’m afraid neither of us know the answer to this one. Can we suggest you contact local Job Centre Plus?

  15. Just wondered if Yasmin or Jill had any luck with their question about volunteers?

  16. Contacted jobcentre plus, they say it is fine to have a volunteer working for you to keep business ticking over while you are on maternity allowance. I hope someone else finds this useful. This has been a very helpful site- thank you!

  17. Stephanie says:

    Thanks for the incredibly useful articles and questions. I work as a freelancer and I am in the process of starting up an online shop, and I’m pregnant (13 weeks). I’d like to know whether I would still be allowed to do a couple of hours of voluntary work during the MA period. It would be something that I could take my baby to and would only be a couple of hours a week, but if it’s not something I’m paid for at all, would that count towards KIT days?

  18. Hi Stephanie,

    Congratulations on your pregnancy!

    There are no problems with you doing voluntary work during your maternity pay period and such unpaid work does not count towards your KIT days.

    See link below

    http://www.workingfamilies.org.uk/articles/pdf/faq/67

    • Thank you very much for your positive comments, Stephanie. And thanks also to Frances (again!) – I thought there were no problems with voluntary work but I really appreciate you confirming that for us.

  19. Hi,

    Ok so I just wanted to see what people thought of this and whether you could legally do it. I am self employed but my business wouldn’t survive all that time off it with 10 days KIT only. I was wondering if you are allowed to do voluntary work can you do things like emails, phone calls etc and call them voluntary also could you do work but call it voluntary and the business get paid for it but you not take a wage as its voluntary work. Then when your maternity allowance ends you can start taking a wage from the business again. Would that be illegal?

    Is there a specific way the business would have to be set up to allow this?

    Any advice would be much appreciated.

    Mel

  20. Voluntary work in the context of the workingfamilies link above is unpaid work for a third-party charity/organisation, so I’m afraid what you are describing would not fall under this category but would be classified as working on your business (whether or not payment was deferred). If you wish to work for your business during your maternity pay period you would be limited to the 10 KIT days. Sorry, I know that’s not what you wanted to hear!

  21. This article and the questions/comments below have been incredibly useful-thank you! I am self-employed, running a sole trader business from home so have been very confused about how I’m supposed to keep the business operating whilsttaking maternity allowance. I believe, if she is who I think she is(!), that I am in exactly the same line of work as Stacey-Marie so her questions were particularly relevant!

    It does seem incredibly unfair that you can earn self-employed income if you’re on SMP, but you can’t even answer an email if you are claiming MA! The nature of my business means that clients book my services sometimes over a year in advance. The current set-up which means any contact I have/blog post I write etc counts as a KIT day means I have to choose essentially between earning anything in the next six months or earning anything in the following six months. There is no way, it seems, of me securing clients for the future (ie after my MA ends) without giving up the MA now. In fact, should I, for example, use more than my 10 KIT days to meet with prospective clients who then don’t hire me. I would lose the MA (and therefore not earn anything for six months) and not have any work for the following 6-12 months either.

    I was interested in the question about other people working as volunteers for my business though. Does this mean that I could get other people to contribute blog posts for example and my husband could upload them and that would be allowed? Could he answer emails on my behalf, but leave my signature at the bottom?!

    It’s all such a minefield. It does seem like these rules were set up before people ran businesses from home on their own. It hardly encourages private enterprise.
    Any advice gratefully received!

    • Sian, as you say, it’s a bit of a minefield. This does sound like bending the rules to me, but you’d need to take advice to be sure. Also bear in mind that this may have implications for your husband – does his contract of employment allow him to have a second job or be self employed, for example?

      Frances and I have decided to close the comments on this post now as we’ve told you everything we know on this subject. Thanks to everyone who has contributed!

Trackbacks

  1. […] The good news is that there are two articles here at Business Plus Baby that tell you what you need to know: Protect Your Right to Maternity Allowance and Self Employment During Your Maternity Pay Period. […]

  2. […] Oh I have just re-read your post. Found a link that might be of interest to you both. (Looks like a very informative site too.) "So what are the options for self-employed traders who want to claim MA? You’re still allowed to draw an income from your business while receiving MA – you’re just not allowed to do the work yourself." http://businessplusbaby.com/2010/12/…?doing_wp_cron […]

  3. […] Confused by whether you can work during your maternity pay period or not? See Frances’ post Self-employment during your maternity pay period […]