From 6 April 2025, small employers will see a significant boost in statutory pay relief. The compensation rate for reclaiming statutory payments, such as maternity, paternity, and adoption pay, will rise from 3% to 8.5%. This means eligible businesses can recover 108% of these costs.
To qualify, businesses must have paid £45,000 or less in Class 1 National Insurance in the previous tax year, excluding reductions like the employment allowance. Claims must be submitted via payroll software using the employer payment summary (EPS). If employers cannot offset payments against current liabilities, they can request a repayment from HMRC at the start of the next tax year.
This update, reported by the Chartered Institute of Payroll Professionals (CIPP), was communicated by HMRC’s software development support team. However, HMRC’s official guidance has yet to be updated.
The change provides much-needed financial relief to small businesses during employee leave periods, supporting those managing statutory maternity, paternity, adoption, shared parental, bereavement, and neonatal care pay.
Combined with the forthcoming increase in the employment allowance from £5,000 to £10,500, this adjustment will ease employer costs amid increases in National Insurance, minimum wage, and living wage. It also makes hiring part-time staff and working parents more viable, helping small businesses manage financial pressures while supporting employees during key life events.
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