Employers recover Statutory Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement and Neonatal Care Pay by claiming it on the Employer Payment Summary and paying HMRC less PAYE. For 2026 to 2027 the recovery rate is 92%, or 109% for employers that qualify for Small Employers’ Relief because their total Class 1 National Insurance in the relevant earlier tax year was £45,000 or less. Statutory Sick Pay cannot be recovered.

Which statutory payments can an employer reclaim?

HMRC’s rates and thresholds for employers 2026 to 2027 lists six payments that can be partly or fully recovered: Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP), Statutory Shared Parental Pay (ShPP), Statutory Parental Bereavement Pay (SPBP) and Statutory Neonatal Care Pay (SNCP). The same page states plainly that Statutory Sick Pay cannot be recovered. The old Percentage Threshold Scheme only covered SSP for periods up to 5 April 2014, so sick pay is a straight cost to the business.

Only payments the employer has properly made can be recovered. HMRC’s Statutory Payments Manual at SPM180600 says recovery cannot be made before the date the statutory payment is due, and payments made in a tax year ending more than six years earlier cannot be recovered.

How does the reclaim work through the Employer Payment Summary?

The payment to the employee goes through the Full Payment Submission like any other pay. The reclaim is made separately, on the Employer Payment Summary (EPS), which must reach HMRC by the 19th of the following tax month for HMRC to reduce what the employer owes. If no employees were paid in a tax month, an EPS is sent instead of an FPS.

The EPS has a field for each payment type reclaimed in the year and a matching field for National Insurance compensation recovered through Small Employers’ Relief. Payroll software normally calculates both. In practice the employer deducts the recoverable amount from the combined PAYE tax, National Insurance, student loan and Construction Industry Scheme deductions it would otherwise pay over. SPM180600 explains that the employer is treated as having paid the National Insurance it withholds in this way.

If the amount to recover is more than the month’s PAYE bill, the employer can carry the balance forward to the next month or apply for advance funding. Where the balance still cannot be set off within the year, the employer can write to HMRC for a repayment, but GOV.UK says this cannot be done until the start of the next tax year.

Who qualifies for Small Employers’ Relief?

An employer is a small employer if its total gross Class 1 National Insurance, both the employees’ primary contributions and the employer’s secondary contributions, was £45,000 or less in the qualifying tax year. HMRC’s guidance at SPM182000 and SPM182100 sets out the detail:

  • Class 1A and Class 1B contributions are excluded.
  • The figure is gross, ignoring reductions such as the Employment Allowance.
  • The qualifying tax year is the last complete tax year before the employee’s qualifying week, matching week, official notification week or relevant week, depending on the payment.
  • The test is applied separately for each employee’s statutory payment, so the same employer can qualify for one employee’s maternity pay and not for another’s.

For SMP the qualifying week is the 15th week before the expected week of birth. For SNCP it is the week before the baby entered neonatal care, unless the employee is entitled to SMP, SPP or SAP, in which case the week for that payment is used.

An employer that traded for less than 12 months in the qualifying year annualises: take the gross Class 1 liability for the months in business, divide by the number of months and multiply by 12 (SPM182200). The rules come from the Statutory Maternity Pay (Compensation of Employers) and Miscellaneous Amendment Regulations 1994 (SI 1994/1882) and, for the other payments, regulation 3 of the Statutory Paternity Pay and Statutory Adoption Pay (Administration) Regulations 2002.

How is the 109% rate made up?

A small employer recovers 100% of the statutory payment plus compensation for the employer’s National Insurance paid on it. HMRC’s manual gives the compensation rates:

Tax year Compensation rate Total recovery for a small employer
2026 to 2027 9% 109%
2025 to 2026 8.5% 108.5%
2024 to 2025 and earlier 3% 103%

All recoverable payments made in the same tax month are added together and the total recovery is calculated on that figure. An employer that is not small recovers 92% and gets no compensation.

What does this look like in numbers?

Illustration only. A design studio’s total gross Class 1 National Insurance for 2025 to 2026 was £38,000 before its Employment Allowance. An employee’s baby is due in February 2027, so the qualifying week falls in the autumn of 2026 and the last complete tax year before it is 2025 to 2026. The studio is a small employer for this employee.

In one tax month the studio pays £1,800 of SMP. It claims 109% on the EPS, which is £1,962. Its PAYE tax and National Insurance for the month is £1,500, so it pays HMRC nothing and carries forward £462, or applies for advance funding. A larger firm paying the same SMP would recover 92%, £1,656.

What if the employer cannot afford to make the payments?

HMRC can pay in advance. Employers apply online for SMP, SPP, SAP and ShPP, no more than 4 weeks before the first payment is due. There is a separate application route for SPBP and SNCP. The application needs the employer PAYE and Accounts Office references, the employee’s details, dates and the amount claimed. GOV.UK warns that a penalty of up to £3,000 per employee for each tax year can be charged if the application contains incorrect information.

An EPS must still be sent for every pay period in which statutory payments are reclaimed. Where the reclaim is more than the PAYE due, HMRC uses the excess to reduce the advance. GOV.UK’s example: PAYE of £2,500, a reclaim of £3,000, and the advance is reduced by £500. Anything still owed at the end of the advance period is paid by that month’s normal payment date.

What about earlier years and insolvency?

SPM181300 explains how to recover statutory pay from a closed year. For 2021 to 2022 or later, a further FPS with corrected year to date figures is used. For 2019 to 2020 or 2020 to 2021 an Earlier Year Update or a further FPS can be used, and for earlier years an Earlier Year Update showing the difference. If the amount cannot be offset against the PAYE bill, the employer sends its calculation to HMRC.

If the employer becomes insolvent, HMRC pays SMP, SPP, SAP or SPBP to employees who were already receiving it, and SMP to pregnant employees who had passed the qualifying week. The insolvency practitioner should contact HMRC’s National Insolvency Unit.

What mistakes are common?

  • Testing Small Employers’ Relief on the current year, or on National Insurance after the Employment Allowance, rather than the gross figure for the correct earlier year.
  • Including Class 1A on benefits in the £45,000 test.
  • Claiming 92% when the business qualified for 109%, or the reverse.
  • Trying to reclaim SSP.
  • Forgetting to send an EPS in a month with no payroll, so the reclaim is never made.
  • Reclaiming before the statutory payment has actually been made.

Statutory pay reclaims are a standard area in an HMRC employer compliance check, so keep the Class 1 workings that support the Small Employers’ Relief claim alongside the payroll records. For a newer payment type, see Statutory Neonatal Care Pay.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.