HM Revenue and Customs have issued a notification to software developers on Tuesday 28th January 2025 of an increase compensation payment for statutory payments.
Apparently HM Treasury had recently consulted on an area of Statutory Payment policy which will impact payroll software. Who they consulted with is not clear and any consideration of developer needs on timing appears to have not been considered with new tax year releases imminent if not already completed. At least the minister for pensions has now escaped the late notification tag.
Currently Employers can reclaim 92% of employees’ Statutory Maternity, Statutory Paternity, Statutory Adoption, Statutory Parental Bereavement and Statutory Shared Parental Pay.
If a business has paid £45,000 or less in Class 1 National Insurance (ignoring any reductions like Employment Allowance) in the last complete tax year prior to the statutory payment commencing for an individual, that employer can qualify for Small Employers Relief (SER) for that case and can reclaim 100% of the Statutory Payment, and an additional 3% compensation. This rate of compensation and associated qualifying amount has been in place since 6th April 2011.
What is the increase?
So some 14 years later from 6th April 2025, the rate of compensation will increase from 3% to 8.5%.
So now Employers who qualify for Small Employers Relief (SER) will therefore be able to reclaim 108.5% from HMRC by completion of the Employer Payment Summary (EPS) which is filed electronically as part of Real Time Information (RTI).
The new 8.5% compensation rate will apply to the following Statutory Payments:
- Statutory Maternity Pay (SMP)
- Statutory Paternity Pay (SPP)
- Statutory Adoption Pay (SAP)
- Shared Parental Pay (SPP)
- Statutory Parental Bereavement Pay (SPBP)
- And the new payment which potentially has its first claimants for births from 6th April 2025, with payments for weeks commencing 14th April 2025 – Statutory Neonatal Care Pay (SNCP)
The Small Employers Relief threshold will remain at £45,000. With the 15% increase in employers National Insurance Contributions, a number of employer will find themselves not qualifying from April 2026.,
Opinion
Just as software developers thought they had all the information for the new tax year, the government have announced a late change in the statutory payments compensation amount. This will be a boost for small businesses in meeting their obligations to make statutory payments for parental leave.
PAYadvice.UK 28/1/2025