Small Employers' Relief: reclaim more than 100% of statutory parental pay

What you can reclaim

Every UK employer, regardless of size, can recover 92% of the statutory pay they give an employee on maternity, paternity, adoption, shared parental or parental bereavement leave — this standard rate also covers the newer statutory neonatal care pay. But employers who qualify for Small Employers' Relief recover the full 100% of what they paid out, plus a compensation top-up on top of that. From 6 April 2026, that top-up is 9%, taking the total small-employer recovery rate to 109% — up from 108.5% in the 2025/26 tax year, which was itself a rise from the long-standing 103% rate. The extra percentage compensates you for the employer National Insurance you paid on the statutory pay itself, so a qualifying small employer effectively gets back more cash than went out the door in the first place. HMRC's guidance on recovering statutory payments confirms 109% as the current, live rate for the 2026/27 tax year.

The rate hasn't stayed still, and it's easy for payroll software or a spreadsheet-based process to fall behind it. It rose from a 3% compensation top-up (103% total) to 8.5% (108.5% total) for 2025/26, and now sits at 9% (109% total) for 2026/27. If your payroll system or bureau is still applying last year's rate, you're either under-claiming money you're entitled to, or — less commonly, but still a problem — over-claiming and risking a correction further down the line. Because the compensation rate can change every tax year, it's worth checking the current figure each April rather than assuming last year's number still holds.

Who counts as a small employer

You qualify as a small employer for this purpose if your total Class 1 National Insurance liability was £45,000 or less in the 'qualifying tax year' — the last complete tax year before the start of the employee's qualifying week (for maternity, paternity and shared parental pay) or matching week (for adoption). This is a specific test based on gross Class 1 NIC, not headcount, turnover or profit, and it excludes Class 1A and Class 1B NIC, any NIC rebates, and the Employment Allowance you may have claimed. Plenty of businesses with 10 to 30 staff sit comfortably under that £45,000 line without ever realising it, particularly where wages are modest or a meaningful share of the workforce is part-time. Because the threshold is unchanged from previous years and confirmed as current in HMRC's 2026/27 rates and thresholds guidance, employers who checked and failed to qualify a few years ago are worth checking again — payroll costs and headcount both move over time.

The test looks backwards, not at your current-year NIC bill, so a business that has grown quickly since the qualifying tax year can still qualify for a parental leave case today, provided the prior complete tax year's Class 1 NIC stayed at or under £45,000. Conversely, a business that had an unusually high NIC bill in the qualifying tax year — perhaps from a one-off bonus round or a hiring spike — could lose small employer status even if it's genuinely smaller now. Always check the specific qualifying or matching week that applies to the employee in question, not simply the calendar year their leave started in.

How the money comes back

The reclaim isn't a separate application to HMRC — it's built directly into routine payroll reporting. Each pay period, the recoverable amount (92%, or 109% for qualifying small employers) is reported on an Employer Payment Summary (EPS) and set off against the PAYE tax, employee NIC and employer NIC you'd otherwise be paying over to HMRC for that period. In most cases this simply reduces your normal monthly or quarterly payment to HMRC, so the business never has to find the statutory pay in cash and then wait weeks for a refund. If the amount you're due to reclaim is bigger than your total PAYE and NIC liability for the period — common for small employers with only a handful of staff, where one maternity pay run can easily dwarf the monthly PAYE bill — you can apply to HMRC for advance funding instead of covering the shortfall out of your own cash flow.

Advance funding requests are made directly to HMRC ahead of the relevant pay date, and HMRC pays the funding into your business bank account so you're not left carrying the cost of statutory pay while you wait to offset it against future PAYE and NIC liabilities. Getting the EPS submitted accurately and on time each month is what keeps this whole mechanism working smoothly — a late, incomplete or missing EPS is one of the most common reasons a genuinely valid reclaim never actually gets paid.

Worked example: small employer reclaiming maternity pay

Take a small bookkeeping firm with eight employees. In the 2024/25 tax year — the qualifying tax year for a maternity leave starting in 2025/26 — its total Class 1 NIC bill was £31,000, comfortably under the £45,000 threshold, so it qualifies for Small Employers' Relief. One employee takes a full period of maternity leave during 2025/26, receiving a total of £7,200 in statutory maternity pay over the leave. Because the firm qualifies as a small employer, it can reclaim 108.5% of that figure — the rate that applied for the 2025/26 tax year — coming to £7,812 in total: the full £7,200 it paid out, plus £612 in compensation for the employer NIC it paid on the SMP. Had the same claim run under the 2026/27 rate instead, at 109%, the reclaim would come to £7,848. Each month, the firm reports the recoverable portion on its EPS and deducts it from the PAYE and NIC it owes HMRC for that period — and in a firm this size, a single month's SMP reclaim can easily exceed the entire monthly PAYE bill, which is exactly the scenario HMRC's advance funding option exists to solve.

Edge cases worth knowing about

Two situations catch employers out beyond the standard eligibility test. First, employers connected to another business — through common control, shared ownership, or being treated as associated employers — must add together the Class 1 NIC liabilities of all connected employers when testing against the £45,000 threshold, not just look at the single entity that runs payroll for the employee going on leave. A group structure that looks small on paper, company by company, can easily tip over the £45,000 line once every connected employer's NIC is combined, so it's worth checking the wider group before assuming small employer status applies. Second, if an employee's qualifying or matching week falls close to a change in business ownership, a TUPE transfer, or a change of PAYE reference, the 'last complete tax year' test can become genuinely ambiguous, and it's safer to get this checked directly rather than guess which year's figures apply.

It's also worth knowing that the 92%/109% split applies consistently across leave types for a given employer, rather than needing to be re-tested type by type. Once you've established your Class 1 NIC position for the relevant qualifying tax year, the same rate applies whether the claim relates to statutory maternity, paternity, adoption, shared parental, parental bereavement or neonatal care pay — there's no separate small-employer test to run for each kind of leave.

Common mistakes

Most missed or miscalculated reclaims trace back to a handful of recurring errors, and all of them are avoidable with a proper payroll process — or correctable after the fact if they've already happened. The starting point is usually a failure to test for small employer status at all: many businesses simply assume they're 'too big' for the relief without ever checking their actual Class 1 NIC figure against the £45,000 threshold, and end up reclaiming only 92% when 109% was available to them. Others get the mechanics wrong rather than the eligibility test — filing the EPS late, incorrectly, or not at all, which means a legitimate reclaim never actually reduces what's paid over to HMRC that month. And some employers fund statutory pay entirely out of pocket, either because nobody realised a reclaim was possible or because the payroll system wasn't configured to apply it, leaving real money unclaimed for months or even years. The common thread across all of these is that they're payroll process failures, not policy problems — and every one of them can be fixed, including retrospectively.

• Not testing Class 1 NIC against the £45,000 threshold before assuming standard-employer (92%) status applies
• Applying an out-of-date recovery rate — still using 108.5% or 103% instead of the current 109% for 2026/27
• Missing, late or incorrect EPS submissions, so the reclaim never offsets the PAYE and NIC bill
• Not applying for advance funding when the reclaim exceeds the monthly PAYE liability, and covering it from cash flow instead
• Failing to combine Class 1 NIC across associated or connected employers when testing the £45,000 threshold
• Not correcting historic underclaims retrospectively once an error in the rate or eligibility test is spotted

How much statutory maternity pay can a small employer reclaim?

109% for the 2026/27 tax year — the full amount you paid out, plus a 9% compensation top-up — if your Class 1 National Insurance bill was £45,000 or less in the qualifying tax year. That's up from 108.5% in 2025/26 and 103% in earlier years. Employers who don't qualify as small employers reclaim 92% instead.

How do I claim Small Employers' Relief?

Through your payroll, not a separate application. The recoverable amount is reported on an Employer Payment Summary (EPS) each pay period and offset against the PAYE tax and NIC you owe HMRC. If the reclaim is bigger than your liability for that period, you can apply to HMRC for advance funding rather than fund it from cash flow. Missed reclaims, including cases where the wrong rate was applied, can be corrected retrospectively.

Does Small Employers' Relief apply to paternity and adoption pay?

Yes — statutory paternity, adoption, shared parental, parental bereavement and statutory neonatal care pay all qualify for the same enhanced recovery rate for small employers, tested against the same £45,000 Class 1 NIC threshold and the same qualifying tax year rule.

Do I need to test small employer status separately for each company in a group?

No, but you do need to combine the figures. If your business is connected to another employer — through common control or shared ownership — HMRC requires you to add together the Class 1 NIC liabilities of all associated employers when testing against the £45,000 threshold, not just look at the payroll entity that employs the person going on leave.

What if I've been reclaiming only 92% for years without realising I qualified as a small employer?

It can be corrected retrospectively. Check your Class 1 NIC figure for each relevant qualifying tax year, and if it was £45,000 or under, the shortfall between the 92% you reclaimed and the enhanced rate that actually applied that year (103%, 108.5% or 109% depending on the tax year) can be put right through your payroll records.