Small Employers’ Relief is Changing: What You Need to Know for April 2025

Starting from April 2025, changes to Small Employers’ Relief will come into effect. The compensation rate is set to increase from the current 3% to 8.5%. This means that eligible employers will be able to reclaim 108.5% of certain statutory payments such as Statutory Maternity Pay (SMP).

Understanding Small Employers’ Relief

The relief is designed to assist small businesses in managing the financial burden of statutory payments.  Employers who qualify can reclaim a higher percentage of specific statutory payments, providing financial relief and supporting cash flow.

Eligibility Criteria

To qualify, an employer’s total National Insurance Contributions liability for the previous tax year must not exceed £45,000.

Impact of the Increased Compensation Rate

With the compensation rate increasing to 8.5%, eligible employers can reclaim 108.5% of certain statutory payments they make. For example, if an employer pays £1,000 in SMP, they can reclaim £1,085 from HMRC, effectively covering the payment and providing an additional 8.5% to assist with associated costs.

Eligible Statutory Payments

The payments that qualify are:

• Statutory Maternity Pay (SMP)
• Statutory Paternity Pay (SPP)
• Statutory Adoption Pay (SAP)
• Statutory Parental Bereavement Pay (SPBP)
• Statutory Shared Parental Pay (ShPP)

How to Claim Small Employers’ Relief

Employers can claim the relief through the Employer Payment Summary (EPS) as part of the Real Time Information (RTI) submissions to HMRC. The relief will then be offset against any PAYE due for that PAYE month, with any balance being carried over to the following months.

How We Can Help

If we process your payroll, rest assured that we will handle these changes automatically, ensuring you receive the correct relief. Our Payroll Team at Johnston Smille stay on top of the latest payroll regulations on your behalf.

If you’re considering outsourcing your payroll and looking for a reliable payroll provider in Edinburgh, get in touch with us today.  We’d be happy to talk to you about our outsourced payroll service and take care of your payroll, so you can focus on running your business with confidence.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.