Small Employers' Relief

LegislationSmall Business
Written By Cheryl Bygrave

What You Can Reclaim

As an employer, you can reclaim statutory payments made to employees, including Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP), Statutory Shared Parental Pay (ShPP), Statutory Parental Bereavement Pay, and Statutory Neonatal Care Pay.

Most employers can reclaim 92% of these payments. However, if your business qualifies for Small Employers' Relief, you can reclaim 109%, the additional 9% is intended to help offset the associated administrative costs.

Qualifying for Small Employers' Relief

You qualify for Small Employers' Relief if you paid £45,000 or less in Class 1 National Insurance (ignoring any reductions such as Employment Allowance) in the last complete tax year before the relevant qualifying event. The qualifying event varies depending on the type of statutory payment:

  • SMP: The 15th week (Sunday to Saturday) before the week of the expected due date

  • SAP: The week your employee was told they had been matched with a child by the adoption agency

  • Overseas adoption: The date on the official notification

  • Statutory Parental Bereavement Pay: The week before the death of the child or stillbirth (or the week before the miscarriage for Northern Ireland)

  • Statutory Neonatal Care Pay: The week before the child started to receive neonatal care (unless the employee is entitled to SMP, SPP or SAP, in which case the relevant qualifying week for that payment is used instead)

The key point is that eligibility is assessed against the gross Class 1 National Insurance figure, any Employment Allowance reduction is disregarded when calculating whether the £45,000 threshold is met.

How to Reclaim

Calculate the amount you are entitled to reclaim using your payroll software and include the figures in an Employer Payment Summary (EPS). The reclaim will then offset against your PAYE liability for the period.

If the amount you are reclaiming is greater than your PAYE deductions for that month, HMRC will carry the balance forward to reduce future liabilities. If no future liability exists, you can write to the PAYE Employer Office to request a repayment, although this cannot be done until the start of the next tax year.

If You Cannot Afford to Make Statutory Payments

If cashflow makes it difficult to fund statutory payments in advance of reclaiming them, you can apply to HMRC to be paid in advance for:

  • Statutory Maternity Pay

  • Statutory Paternity Pay

  • Statutory Adoption Pay

  • Statutory Shared Parental Pay

You can apply up to four weeks before the first payment is due. Applications submitted earlier than this may be returned. There is a separate process for Statutory Parental Bereavement Pay and Statutory Neonatal Care Pay.

Important: You can be charged a penalty of up to £3,000 per employee per tax year if your application contains incorrect information.

Even if you have received an advance payment from HMRC, you must still submit an EPS for each pay period in which you are reclaiming statutory payments. HMRC will automatically use any excess reclaim to reduce the outstanding advance.

Final Thoughts

Small Employers’ relief interacts directly with your monthly PAYE submission and by getting this right can help to avoid any unnecessary overpayments and administrative burden or corrections later. If you are unsure if this applies to your business or would like to review your current position, please get in touch.

Cheryl Bygrave
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