The increase in statutory pay compensation from 6 April 2026 will be welcome for smaller employers, although it is a modest one. The rate of compensation paid for administering statutory payments will rise from 8.5% to 9%. Even so, this small increase is unlikely to offset the higher minimum wage rates or the cost of the new day one rights for employees, both of which will also take effect from 6 April 2026.
What is changing?
Employers can usually reclaim 92% of statutory payments. However, smaller employers can recover 100% of the cost, along with the additional 9% compensation.
That means the total rate of recovery will increase to 109% from 6 April 2026.
For example, if statutory maternity pay of £1,000 is paid, the normal recovery is £920. A smaller employer, by contrast, will recover £1,090.
Which payments are included?
This applies to a range of statutory payments. These include maternity, paternity, adoption, shared parental, parental bereavement and neonatal care pay.
However, statutory sick pay is not recoverable.
Who counts as a smaller employer?
For statutory payments purposes, an employer is classed as small if their total Class 1 national insurance contribution payments were £45,000 or less for the tax year before the employee’s qualifying week.
Both employee and employer contributions are included in that figure. Class 1A and Class 1B NICs are not included.
It is also important to note that the £10,500 employment allowance is not deducted when deciding whether the £45,000 threshold has been met.
For example, Class 1 NIC payments might be £40,000 after deducting the full employment allowance. In that case, the relevant figure would actually be £50,500. As a result, the employer would not qualify.
Why the qualifying week matters
The qualifying week is not the same in every case. It varies depending on the type of leave involved.
For statutory adoption pay, for example, the relevant week is the one in which the employee is informed by the adoption agency that they will be matched with a child.
How relief is claimed
Relief is claimed monthly through payroll software using the employer payment summary.
A small increase, but still worth understanding
This increase in statutory pay compensation will not transform employer costs. Still, it is worth understanding, especially for smaller businesses already managing rising employment costs. A little extra support is being offered. However, whether an employer qualifies, and how much can be reclaimed, will depend on the detail.
HMRC’s guide to getting financial help with statutory pay can be found here