NICs Compensation Rate on Statutory Payments

Small Employers Relief increased to 8.5% for 2025-26

Last month HM Revenue and Customs (HMRC) notified payroll software developers of an increase in National Insurance Contributions Compensation (NICs Comp) for child related statutory payments, following a consultation by HM Treasury. However, the consultation process and timing considerations for payroll software developers remain unclear, with new tax year releases already in progress.

Currently, employers can reclaim 92% of various statutory payments, with small employers—those who paid £45,000 or less in Class 1 National Insurance in the previous tax year—qualifying for Small Employers’ Relief (SER). These businesses can reclaim 100% of statutory payments plus a 3% compensation.

Effective from 6th April 2025, the compensation rate will increase from 3% to 8.5%, allowing qualifying employers to reclaim 108.5% of statutory payments through the Employer Payment Summary (EPS) system.

The new rate will apply to:

  • Statutory Maternity Pay (SMP)

  • Statutory Paternity Pay (SPP)

  • Statutory Adoption Pay (SAP)

  • Shared Parental Pay (ShPP)

  • Statutory Parental Bereavement Pay (SPBP)

  • The newly introduced Statutory Neonatal Care Pay (SNCP), applicable from 14th April 2025

The SER threshold remains at £45,000, but with a 15% rise in employer National Insurance Contributions, some businesses may lose eligibility from April 2026.

Source: CIPP

 

NICs Compensation Rate
Mascolo & Styles