Good news for small businesses: the Small Employers’ Relief (SER) rate will increase to 9% commencing 6 April 2026 (tax year 2026-27). If eligible, you may recover 109% of statutory family-related payments, encompassing 100% of statutory pay along with an additional 9% compensation, to assist in offsetting employer National Insurance contributions and administrative costs.
What Is Small Employers’ Relief?
Small Employers’ Relief assists eligible small employers in recouping the costs associated with specific statutory family-related payments made to employees during periods such as maternity, paternity, adoption, shared parental, bereavement, or neonatal care leave.
Employers are legally obligated to disburse these statutory amounts via payroll. If your business qualifies, you are entitled to reclaim 100% of the statutory payments, along with an additional compensation percentage to help offset employer costs, including employer National Insurance contributions and administrative expenses. Effective from 6 April 2026, this compensation rate will increase to 9%, allowing for the recovery of 109% of the statutory pay.
Who Can Claim This Relief?
Your business qualifies if it paid £45,000 or less in Class 1 National Insurance contributions during the last complete tax year. This eligibility threshold remains unchanged.
Importantly, the £45,000 limit is based on the previous tax year’s NICs, not the current year’s. For example, if you claim relief in 2026-27, HMRC will review your 2025-26 Class 1 NICs to determine qualification. Eligibility depends solely on your total Class 1 NIC liability, not on the number of employees.
Which Payments Are Covered?
Small Employers’ Relief applies only to statutory family-related payments. If you qualify, you can reclaim these payments at 109% (from April 2026):
- Statutory Maternity Pay (SMP), payable for up to 39 weeks
- Statutory Paternity Pay (SPP), payable for eligible partners (up to two weeks)
- Statutory Adoption Pay (SAP), similar structure to maternity pay for adoptive parents
- Statutory Shared Parental Pay (ShPP), where parents share leave and pay following birth or adoption
- Statutory Parental Bereavement Pay (SPBP), for eligible parents following the death of a child
- Statutory Neonatal Care Pay (SNCP), for parents of babies requiring neonatal care
If you meet the eligibility criteria, you can reclaim 100% of these statutory amounts plus the additional compensation percentage.
Not covered:
- Statutory Sick Pay (SSP)
- Any enhanced or contractual payments above the statutory rate
What the 9% Increase Actually Means
From 6 April 2026, eligible employers can reclaim 109% of qualifying statutory family-related payments under Small Employers’ Relief through HM Revenue and Customs.
This means you recover:
- 100% of the statutory payment, plus
- an additional 9% compensation
The additional percentage helps offset employer costs associated with administering these payments, such as employer National Insurance contributions and payroll processing.
Example
Your employee receives £2,150 in Statutory Maternity Pay (SMP).
You can reclaim:
- £2,150 statutory pay
- £193.50 compensation (9%)
- Total reclaim: £2,343.50
So, you receive £193.50 more than the statutory amount paid, improving short-term cash flow.
How Do You Actually Claim It?
You claim Small Employers’ Relief through your normal payroll reporting process: there is no separate application form.
If you use payroll software
Most payroll software calculates the reclaim automatically. It reports the statutory payments and the Small Employers’ Relief through your payroll submissions and offsets the amount against your PAYE and National Insurance liability.
If you calculate payroll manually
You must:
- Total the qualifying statutory family-related payments you have made
- Apply the Small Employers’ Relief percentage (109% from April 2026)
- Report the reclaim through your payroll submission
- Reduce your payment to HMRC by the reclaim amount
Record-keeping
Keep clear payroll records for each employee, including:
- Statutory payment type
- Dates and amounts paid
- Calculation of the reclaim
- Evidence of eligibility
These may be required during an HMRC compliance check.
When Your Reclaim Is More Than You Owe
If your reclaim exceeds your PAYE/NIC liability for that period, you can:
- Carry the balance forward to the next pay period, or
- Request a refund from HMRC
(Processing times for refunds vary.)
Getting Ready for April 2026
The new Small Employers’ Relief compensation rate of 9% takes effect from 6 April 2026. Preparing in advance will help ensure your payroll calculations and reporting remain accurate from the start of the new tax year.
Essential steps
- Confirm that your payroll software will automatically apply the 109% reclaim rate beginning in April 2026.
- Ensure that system updates have been installed prior to your first payroll processing in the new tax year.
- Review eligibility by analyzing your previous year’s Class 1 NIC totals.
- Keep comprehensive records of all statutory family-related payments.
- Incorporate statutory payments and reclaim timing considerations into your cash flow planning.
Consider Cash Flow Timing
Although eligible employers are permitted to reclaim an amount exceeding the statutory payment, there may be a brief delay between disbursing payments to employees and offsetting or recovering the reclaim through payroll. If multiple employees are on leave concurrently, it is advisable to ensure sufficient funds are available initially until the reclaim is processed or offset against your PAYE/NIC liability.
Mistakes Small Employers Often Make
Avoid these common errors when claiming Small Employers’ Relief:
- Not claiming at all: Some employers are unaware they qualify and fail to recover statutory payments they are entitled to reclaim.
- Incorrect calculations: Relief is calculated at 109% of qualifying statutory payments (from April 2026). For example, £1,000 paid means £1,090 reclaimable.
- Using the wrong tax year for eligibility: Qualification is based on Class 1 NICs from the previous complete tax year, not the current year.
- Claiming non-statutory or enhanced pay: Only the statutory portion is reclaimable. Any enhanced or contractual top-ups cannot be included.
- Poor record-keeping: Missing or incomplete payroll records can lead to queries, rejected claims, or repayments during compliance checks.
- Outdated payroll systems or settings: Failing to update payroll software may result in incorrect reclaim percentages or reporting errors.
How The Infinity Group Can Help
Managing payroll legislation, statutory payments, and reclaim rules can prove to be time-consuming and complex endeavours. The Infinity Group provides support to small and expanding companies by offering expert guidance, timely compliance updates, and comprehensive outsourced payroll services.
Our services encompass:
- Managing your payroll comprehensively through our outsourced payroll service
- Establishing systems to automatically and accurately claim Small Employers’ Relief
- Monitoring payroll procedures to identify any overlooked or unclaimed statutory pay recoveries
- Deploying and maintaining appropriate payroll software and reporting frameworks
- Updating systems in accordance with legislative changes, including the implementation of the 109% reclaim rate starting April 2026
- Delivering regular updates on rule modifications issued by HM Revenue and Customs
- Providing practical advice and support for statutory payments and compliance-related inquiries
Whether you require complete payroll outsourcing or continuous technical assistance, we offer dependable, compliant solutions tailored specifically to your business.