Statutory Maternity Pay Recovery Rate to Increase – What You Need to Know

Statutory Maternity Pay Recovery Rate to Increase – What You Need to Know

From 6 April 2025, the recovery rate for smaller employers claiming Small Employers Relief (SER) for Statutory Maternity Pay (SMP) will increase. This change is aimed at easing the financial burden on small businesses and will see the compensation rate rise from the current 3% to 8.5%, allowing eligible employers to recover 108.5% of the statutory maternity pay they have paid out.

What Is SER?

SER is designed to help small businesses manage the costs associated with employees on maternity leave. For businesses with a gross Class 1 National Insurance (NI) contributions liability of £45,000 or less in the previous tax year, SER allows for the recovery of 100% of SMP paid to employees, plus an additional compensation payment to cover the extra costs incurred by the employer.

Current Recovery Rate and the Upcoming Increase

Currently, smaller employers can recover 100% of the SMP paid, along with an additional 3% compensation to account for other related costs. However, from 6 April 2025, this additional compensation will increase to 8.5%, which will bring the total recovery rate to 108.5%.
Why Is This Change Happening?

The increase to the SMP recovery rate is a direct response to the increase in secondary NI contributions. As part of the government’s efforts to ensure that smaller employers are not financially disadvantaged by these changes, the government has adjusted the additional compensation in SER. This move aims to offset any potential losses that small employers might incur as a result of higher NI obligations.

What Does This Mean for Employers?

1. Increased Financial Relief: Instead of just recovering 100% of the statutory maternity pay, eligible employers will now be able to recover a total of 108.5% from April 2025.

2. Applies to Other Statutory Payments: This increase in the recovery rate is not limited to statutory maternity pay. It will also apply to other statutory family-related payments, including:
o Statutory Paternity Pay (SPP)
o Statutory Adoption Pay (SAP)
o Shared Parental Pay (ShPP)
o Statutory Parental Bereavement Pay (SPBP)
o Statutory Neonatal Pay (SNP)

3. Increase in SMP Rate: In addition to the increase in the recovery rate, the weekly statutory maternity pay rate will also rise from £184.03 to £187.18 from 6 April 2025. This is the standard rate, though an earning-related rate applies to the first six weeks of maternity or adoption pay.
Check Your Eligibility for SER

Remember that due to the lower rate of primary NI contributions in 2024/25 compared to 2023/24, some employers who previously did not qualify for SER may find that they now qualify for the 2025/26 tax year. This could potentially benefit businesses that were just outside the £45,000 threshold in the previous year.

If you are an employer or employee affected by the above issue and want advice or support in connection with the same, or any employment law or HR issues more generally, please do not hesitate to contact us on 01206 239761.