The rate of compensation paid to smaller employers for administering statutory payments will increase from 8.5% to 9% on April 6, 2026, although it will be much less generous than the increase last year.
Employers may appreciate the additional funding, but it won’t cover the cost of the new “day one” rights for all workers or the higher minimum wage rates that will take effect on April 6, 2026.
Recuperation
92% of statutory payments are typically recoverable by employers; however, smaller employers may recover 100% of the cost in addition to the 9% compensation. Thus, starting on April 6, 2026, the overall rate of recovery will be 109%.
For instance, the typical recovery is £920 if statutory maternity pay of £1,000 is paid. A smaller employer, however, will get £1,090 back.
Statutory sick pay is not recoverable, but statutory payments for maternity, paternity, adoption, shared parental, parental bereavement, and neonatal care are.
Employers that are smaller
If an employer’s total class 1 national insurance contribution (NIC) payments for the tax year prior to the employee’s qualifying week were £45,000 or less, they are considered small for statutory payments purposes:
- Class 1A and 1B NICs are not included, but employer and employee contributions are.
- When determining whether the £45,000 threshold is reached, the £10,500 employment allowance is not subtracted. For instance, class 1 NIC payments may be £40,000, but the relevant amount is £50,500 if the full employment allowance is subtracted. It is therefore too high to be eligible.
- The type of leave determines the qualifying week. For instance, the relevant week for statutory adoption pay is the week the adoption agency notifies the employee that they will be matched with a child.
Payroll software uses the employer payment summary to claim relief on a monthly basis.
HMRC’s guide to getting financial help with statutory pay can be found here.