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Effective April 6, 2025, HM Treasury increased the compensation rate for small employers reclaiming statutory parental and bereavement payments from 103% to 108.5%. This applies to employers who paid £45,000 or less in Class 1 National Insurance Contributions in the last complete tax year. The change affects reimbursement for Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay, Statutory Parental Bereavement Pay, and Statutory Neonatal Care Pay. Employers not qualifying for Small Employers Relief continue to reclaim 92%.
Effective April 6, 2025, HM Treasury increased the compensation rate for small employers reclaiming statutory parental and bereavement payments from 103% to 108.5%. This change applies to employers in England, Scotland, Wales, and Northern Ireland who paid £45,000 or less in Class 1 National Insurance Contributions (NICs) in the last complete tax year.
Who is affected
This change affects employers who qualify for Small Employers Relief. To qualify, an employer must have paid £45,000 or less in Class 1 NICs in the last complete tax year before the claim, excluding reductions such as Employment Allowance. The £45,000 threshold remains unchanged from previous years.
Employers who do not meet this threshold continue to reclaim statutory payments at the existing 92% rate.
What's changing
The compensation rate for small employers reclaiming statutory payments increased by 5.5 percentage points:
| Employer Type | Rate Before April 6, 2025 | Rate From April 6, 2025 |
|---|---|---|
| Small employers (≤£45,000 Class 1 NICs) | 103% | 108.5% |
| Non-qualifying employers (>£45,000 Class 1 NICs) | 92% | 92% (unchanged) |
The increased compensation applies to six statutory payment types:
- Statutory Maternity Pay (SMP)
- Statutory Paternity Pay (SPP)
- Statutory Adoption Pay (SAP)
- Statutory Shared Parental Pay (ShPP)
- Statutory Parental Bereavement Pay (SPBP)
- Statutory Neonatal Care Pay (SNCP)
Small employers now reclaim 100% of the statutory payment made to employees plus an additional 8.5% to cover associated National Insurance Contributions, up from 3% previously.
What NEO partners and clients should do
- By April 6, 2025: Update payroll systems to apply the 108.5% reimbursement rate for all statutory payments made on or after this date.
- Before processing April 2025 payroll: Confirm your payroll provider has implemented the updated compensation calculation in their software.
- Review eligibility: Verify whether your organization qualifies for Small Employers Relief by checking Class 1 NIC payments for the last complete tax year.
- Update internal documentation: Revise any employer handbooks or finance procedures that reference the previous 103% rate.
