In an instance of surprising generosity, HMRC compensates smaller employers to make it easier for them to administer statutory payments to their employees.
From 6th April 2025, the compensation rate is going up to 8.5% – almost triple the previous 3%.
Employers can usually only claim back 92% of statutory maternity, paternity, adoption, or parental bereavement payments, but smaller employers can recover the whole cost plus compensation.
This means the total statutory payment recovery rate for small employers will be 108.5% – excluding Statutory Sick Pay (SSP), which is no longer recoverable.
Here’s what small employers should know about recovering statutory payments.
Who counts as a small employer?
Employers are eligible for Small Employers’ Relief if their total Class 1 National InsuranceContributions for the last complete tax year didn’t exceed £45,000 before the qualifying week.
This total includes both employee NICs and employer NICs, but excludes Class 1A or 1B contributions. It also ignores any reductions (like the Employment Allowance).
With the Class 1 NIC rate being lower for 2024–2025 than it was in 2023–2024, an employer who might previously have been just above the £45,000 threshold could qualify in 2025–2026.
The qualifying week (Sunday to Saturday) will depend on the type of leave. For example, the qualifying week for maternity pay is the fifteenth week before the pregnancy due date.
If a smaller employer can’t afford to make statutory payments to an employee, they can apply to HMRC for advance payments up to four weeks before the first payment is required.
Statutory payment recovery
HMRC’s guide to financial help for statutory pay can be viewed on the government website.
Whether at the normal rate or the small employer rate, employers can claim statutory payment relief on a monthly basis. Your payroll software should do this automatically using the employer payment summary, though you might have to specify that you’re a small employer.
If you need professional help with payroll services to manage statutory payments and claim Small Employers’ Relief, you can always come to our accountants in Barnsley.
At gbac, we provide a range of financial services to help employers of all sizes manage their books in compliance with HMRC regulations. Call 01226 298 298 or email info@gbac.co.uk to learn more.