Smaller employers (those who have gross Class 1 National Insurance contributions liability of £45,000 or less in the previous tax year) can recover 100% of the statutory maternity pay they have paid out plus an additional compensation payment. This additional rate is currently 3% but will increase on 6 April 2025 to 8.5%, allowing for a total recovery of 108.5%. What’s the reason for this?
Small Employers Relief seeks to support smaller employers with the associated costs of having an employee on maternity leave (such as the employer’s share of NI that might be payable, as well as administration and recruitment costs). Since 2011, this has been calculated as requiring an extra 3% to compensate for these additional costs. However, due to the increase in the rate of secondary NI contributions from 6 April 2025, this is now being increased to 8.5% to ensure that smaller employers do not lose out as a result.
Recovery applies not only to statutory maternity pay, but also statutory paternity pay, statutory adoption pay, shared parental pay, statutory parental bereavement pay, and, from 6 April 2025, statutory neonatal pay. From 6 April 2025, the set rate increases from £184.03 per week to £187.18 per week (an earning-related rate applies to the first six weeks of maternity/adoption pay). This amount, or 90% of an eligible employee’s average weekly earnings if lower, is payable and can be recovered.
Tip. Run a payroll check to see if your liability for NIC qualifies for Small Employers Relief for the previous tax year before your employee’s qualifying/matching week. As the rate of primary NI contributions was lower in 2024/25 than 2023/24, if you previously just fell outside the £45,000 threshold, you may find that you qualify from 6 April 2025.
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