Small Employers’ Relief: How to Reclaim 109% of Statutory Payments

If one of your employees is going on maternity, paternity, adoption, shared parental, parental bereavement or neonatal care leave, Small Employers’ Relief could mean you get back more from HMRC than you actually paid out in statutory payments.

From 6 April 2026, qualifying small employers can recover 109% of eligible statutory payments through their PAYE account. That means you can reclaim 100% of the statutory payment itself, plus an additional 9% compensation.

If you have never claimed Small Employers’ Relief before, or if you are not sure whether your business qualifies, this guide covers everything you need to know.

What Is Small Employers’ Relief?

Small Employers’ Relief (SER) is an HMRC scheme that allows eligible small businesses to recover a higher percentage of statutory family-related payments than larger employers can. The rationale is straightforward: when an employee goes on leave and you are legally required to pay statutory maternity pay, statutory paternity pay or similar, the cash flow impact on a small business can be proportionally much greater than it is for a large organisation with a bigger payroll.

The scheme recognises this by allowing qualifying small employers to recover the full statutory payment plus an additional compensation amount. For the 2026 to 2027 tax year, this is 9%, giving a total recovery rate of 109%.

Our post on national insurance contributions gives a helpful overview of how employer and employee NI works if you want a clearer picture of how payroll costs are structured.

Which Statutory Payments Does SER Apply To?

Small Employers’ Relief applies to the following statutory family-related payments:

Statutory Payment	Abbreviation	Standard Duration
Statutory Maternity Pay	SMP	Up to 39 weeks
Statutory Paternity Pay	SPP	1 or 2 weeks
Statutory Adoption Pay	SAP	Up to 39 weeks
Statutory Shared Parental Pay	ShPP	Up to 37 weeks, shared between parents
Statutory Parental Bereavement Pay	SPBP	2 weeks
Statutory Neonatal Care Pay	SNCP	Up to 12 weeks

One important distinction to be aware of is Statutory Sick Pay (SSP). SSP cannot currently be reclaimed from HMRC, so it falls outside the scope of Small Employers’ Relief.

From 6 April 2026, SSP rules changed so eligible employees can receive SSP from the first full day of sickness absence, and the lower earnings limit no longer prevents eligible employees from qualifying. The weekly SSP rate for 2026 to 2027 is £123.25 or 80% of the employee’s average weekly earnings, whichever is lower. Even with these changes, SSP remains a cost for the employer and cannot be recovered through SER.

Our post on hybrid work models and the challenges they bring touches on how flexible working arrangements have changed the landscape around employee entitlements and business costs.

Who Qualifies for Small Employers’ Relief?

To qualify for SER, your total Class 1 National Insurance liability in the relevant previous tax year must have been £45,000 or less. This includes both employee and employer Class 1 National Insurance contributions and is assessed before reductions such as the Employment Allowance are applied.

If your Class 1 NI liability was above £45,000 in the relevant previous tax year, you do not qualify for SER. In that case, you fall into the standard recovery category, which usually allows you to recover 92% of eligible statutory payments rather than 109%.

A few additional points are worth knowing:

• The qualifying test looks at the relevant previous tax year, not the current one
• The threshold is assessed before Employment Allowance or similar reductions are applied
• New employers may need payroll software or accountant support to apply the rules correctly
• Connected companies and groups may need to consider how their payroll and NI liabilities are structured
• You should check eligibility each tax year because payroll growth can move a business above the £45,000 threshold

Understanding the Two Recovery Rates

The difference between the standard recovery rate and the SER rate is significant:

Employer Type	Recovery Rate	Explanation
Standard employers	92%	8% of every eligible statutory payment is borne by the employer
Small employers qualifying for SER	109%	100% of the payment plus 9% compensation

For example, if a standard employer pays £8,000 in statutory maternity pay, they recover £7,360 and absorb £640 out of their own funds.

For a small employer qualifying for SER, the recovery on the same £8,000 statutory payment is £8,720. That means the employer recovers £720 more than the statutory pay they paid out.

The additional 9% is not a general business grant. It is part of the statutory payment recovery system and is designed to compensate small employers for the additional cost and disruption of funding statutory family-related pay.

If you want to understand how your NI costs are structured across your payroll more generally, our post on income tax and NI in England, Wales and Northern Ireland is a useful reference.

How the Statutory Payment Rates Work

Statutory family payments are made up of different elements depending on the type of leave.

For statutory maternity pay and statutory adoption pay:

• The first 6 weeks are paid at 90% of the employee’s average weekly earnings
• The remaining 33 weeks are paid at the lower of the standard weekly rate or 90% of average weekly earnings

For 2026 to 2027, the standard weekly rate for SMP, SPP, SAP, ShPP, SPBP and SNCP is £194.32 or 90% of the employee’s average weekly earnings, whichever is lower.

Statutory paternity pay, statutory shared parental pay, statutory parental bereavement pay and statutory neonatal care pay are paid at the standard weekly rate, subject to the relevant eligibility rules.

The fact that the first 6 weeks of SMP and SAP are earnings-related rather than a flat rate means higher-earning employees generate a larger statutory payment during that period. This increases both your outlay and, proportionately, your SER recovery.

Our post on understanding the calculation of holiday pay covers how average earnings are calculated for payroll purposes, which is directly relevant to working out the first 6 weeks of SMP.

How Do You Actually Claim Small Employers’ Relief?

The recovery mechanism works through your PAYE account. You do not make a separate claim to HMRC each time you pay an employee their statutory payment. Instead, you report the statutory payments through payroll and include the recovery figures in your Employer Payment Summary (EPS).

Here is how the process works in practice:

• You pay your employee their statutory payment through payroll
• Your payroll software calculates the amount recoverable
• You include the statutory payment recovery in your EPS submission to HMRC
• The recoverable amount is offset against your PAYE and NI liability
• If you cannot set the full recovery against current-year PAYE liabilities, you may be able to request a repayment from HMRC after the start of the next tax year

If you know you cannot afford to make statutory payments before recovering them, you may be able to apply to HMRC for advance funding. This is different from correcting the normal recovery through your EPS and should be planned carefully.

Our post on cash flow forecasting for small businesses is relevant here, because timing your payroll and HMRC recoveries sensibly can make a material difference to your monthly cash position.

What Records Do You Need to Keep?

HMRC can enquire into your SER claims, so keeping thorough records is essential. The documentation you should retain includes:

• The employee’s MAT B1 certificate, copy certificate or equivalent evidence for maternity pay
• Adoption matching evidence or official notification where relevant
• Records showing how average weekly earnings were calculated
• Payslips confirming the statutory payments made
• Payroll reports showing the statutory payment recovery
• EPS submissions showing the amounts recovered
• Correspondence with HMRC if you requested advance funding or repayment

Records should be kept for at least 3 years from the end of the tax year they relate to. Good business bookkeeping services make maintaining this kind of organised record archive much more straightforward, because your payroll and employment documentation is filed correctly as a matter of routine.

How SER Interacts With the Employment Allowance

Small Employers’ Relief and the Employment Allowance are separate reliefs, and you can claim both if you qualify for each independently.

The Employment Allowance reduces eligible employer National Insurance liability by up to £10,500 per tax year. From April 2025, the previous £100,000 Class 1 National Insurance eligibility cap for Employment Allowance was removed, although other eligibility rules still apply.

SER, on the other hand, affects how much of your eligible statutory family-related payments you can recover. For SER, the £45,000 Class 1 NI test is applied before reductions such as Employment Allowance.

Because both reliefs affect how your monthly PAYE payments to HMRC are calculated, it is important that your payroll software or accountant is applying them correctly. Getting this wrong can mean either underpaying HMRC or missing out on relief you are entitled to.

If you want to understand the broader employment cost picture for your business, our post on director pay: salary vs dividends in 2026 explains how directors can structure their own pay to manage their NI exposure, and our post on setting up a limited company in the UK is useful if you are at the stage of deciding what business structure to use.

Common Mistakes Employers Make With Small Employers’ Relief

The most frequent errors that arise with SER are:

• Not checking whether the business qualifies each year, particularly if payroll costs have grown and the NI threshold may have been exceeded
• Using the standard 92% recovery rate when the business actually qualifies for 109%
• Assuming the old 103% SER rate still applies
• Forgetting to include Statutory Neonatal Care Pay in eligible recoverable payments
• Trying to reclaim SSP, which is not recoverable
• Failing to record the statutory payment correctly in the EPS, which means HMRC does not process the recovery properly
• Not planning cash flow where the recovery exceeds the PAYE liability for the period
• Keeping inadequate records of the statutory payment calculation, which creates problems if HMRC queries the claim

Our post on what an accountant does for an SME covers the role of an accountant in making sure reliefs like SER are applied correctly and that nothing your business is entitled to is missed.

How This Fits Into Your Broader Payroll and Company Obligations

Statutory payments and their recovery sit within a wider set of payroll obligations that small employers need to manage. Alongside SMP and similar payments, you are responsible for RTI submissions to HMRC, employer NI, auto-enrolment pension contributions, statutory leave records and the correct calculation of employee income tax through PAYE.

Our post on minimum living wage from April 2025 is relevant if you have lower-paid employees and want to understand how minimum wage changes interact with payroll planning.

If you use subcontractors rather than employees in part of your business, our post on CIS for contractors: a checklist covers how the Construction Industry Scheme works and why the distinction between employment and self-employment matters for your NI obligations.

Getting your company accounts right requires that statutory payments, SER recoveries and Employment Allowance are all properly accounted for in your financial records. Our post on limited company year-end accounts explains what goes into preparing and filing your annual accounts and why payroll accuracy underpins everything.

For a broader view of how statutory payments and other employee costs show up in your financial reports, our post on financial data analytics and decision making covers how data-driven reporting helps you see your cost picture clearly throughout the year.

How Asmat & Co Accountants Can Help

As a firm acting as a slough accountant with nearly 2 decades of experience supporting small businesses, Asmat & Co Accountants manages payroll, PAYE submissions and statutory payment recovery for clients across the region. We make sure SER is applied correctly, that your EPS submissions are accurate, and that any recoveries due from HMRC are handled properly.

Our tax return services cover the personal tax side for directors and self-employed individuals, and if you also handle vat return accountant requirements alongside your payroll, we manage both under one roof.

For sole traders who take on their first member of staff, our self employed accountant service can help you navigate the transition to becoming an employer and make sure you are set up correctly from day one.

We also produce quarterly financial reports for clients who want an ongoing picture of how their payroll costs, statutory payments and recoveries are affecting their business finances throughout the year, rather than waiting until the year-end accounts to find out.

Our small business accountants Reading team serves clients across Berkshire, and our post on switching to an online accountant explains how straightforward it is to move your payroll and accounting to us if you are currently managing it yourself.

Our post on virtual CFO services and why they are in demand is worth reading if you are at a stage where you want more strategic financial oversight alongside the compliance side of things.

Frequently Asked Questions

Do I need to apply to HMRC to claim Small Employers’ Relief?

You do not submit a separate SER application. Eligibility is based on your Class 1 National Insurance liability in the relevant previous tax year, and recovery is processed through your payroll software when you submit your EPS correctly. Your payroll software should help calculate the recovery, but it is always worth confirming eligibility with your accountant at the start of each tax year.

What if my NI liability was just above £45,000 last year? Can I still claim?

No. The threshold is a strict cut-off. If your Class 1 National Insurance liability exceeded £45,000 in the relevant previous tax year, you are not eligible for SER and your recovery rate is usually 92%. If your liability was close to the threshold, it is worth reviewing your payroll structure with an accountant to understand your position for future years.

Can a sole trader with employees claim Small Employers’ Relief?

Yes. SER is not restricted to limited companies. If you are a self-employed sole trader who employs staff and your Class 1 National Insurance liability was £45,000 or less in the relevant previous tax year, you may qualify.

What if I paid SMP to more than one employee in the same year?

You can recover SER on all eligible statutory payments made during the year, regardless of how many employees are involved, provided the business qualifies. Each payment is recovered through the same EPS mechanism, and the recoverable amounts are cumulative.

How quickly does HMRC process a repayment request?

The timing depends on the type of repayment or advance request and whether your payroll submissions are accurate. If you cannot offset statutory payment recovery against your current-year PAYE liabilities, you can write to HMRC after the start of the next tax year to ask for repayment. If you cannot afford to make statutory payments in advance, you may be able to apply for advance funding.

Delays can occur if there are discrepancies in your EPS submissions or payroll records. Our post on pricing for online accountants is relevant if you are considering whether having a payroll accountant manage this is cost-effective for your business.

Does SER cover statutory sick pay?

No. Statutory Sick Pay cannot currently be reclaimed from HMRC. SER applies to eligible statutory family-related payments, not SSP. From 6 April 2026, SSP is payable from the first full day of sickness absence for eligible employees and is calculated as £123.25 per week or 80% of average weekly earnings, whichever is lower.

If I get the SER rate wrong and only recover 92%, can I correct it?

Yes, it may be possible to correct payroll submissions if you have used the standard 92% recovery rate when you should have qualified for SER. You should address this promptly, because the correction route depends on the tax year, payroll software and the submissions already made. An accountant can help you identify the shortfall and submit corrected figures where possible.

Does claiming SER affect my corporation tax position?

The statutory payments you make are deductible as a business expense in your accounts. When you recover SER, the recovery is treated as income or as a reduction of the payroll cost, depending on how your accounts are prepared. Your company accounts accountant will make sure these entries are handled correctly in your statutory accounts and corporation tax return.

Get Your Statutory Payment Recovery Right

Small Employers’ Relief is one of the most useful payroll reliefs available to qualifying businesses, but it only works properly when your payroll submissions are accurate and your records are in order. If you are paying statutory family leave payments and not recovering the full 109%, you may be leaving money on the table.

Contact Asmat and Co today and let us review your payroll setup, confirm your SER eligibility, and make sure every penny you are entitled to is being recovered correctly.