If you run payroll for a small business and one of your team has just gone on maternity or paternity leave, you can get more back from HMRC than you pay out. From 6 April 2026, qualifying small employers reclaim 109% of statutory parental pay. Many businesses still reclaim at the wrong rate and quietly lose money every payroll run.
TL;DR: Small employers can reclaim 109% of statutory maternity, paternity, adoption, shared parental, parental bereavement and neonatal care pay from 6 April 2026, up from 108.5% the year before. You qualify if your total Class 1 National Insurance was £45,000 or less in the last complete tax year. Larger employers reclaim 92%. You claim through an Employer Payment Summary, and you can ask HMRC for the money in advance if cash flow is tight.
How Much Can Small Employers Reclaim in 2026-27?
A qualifying small employer reclaims 109% of the statutory parental payments they make (GOV.UK). That is the full 100% of the pay, plus a 9% compensation payment on top to cover the employer National Insurance you paid on it.
The compensation slice went up on 6 April 2026. It was 8.5% for 2025-26, and only 3.5% before that (CIPP). So the total reclaim moved from 108.5% to 109%. A small change on paper, but it means every eligible small employer now gets back slightly more than the wage cost of the leave.
Larger employers are treated differently. If your Class 1 National Insurance bill was over the threshold, you reclaim 92% of the payments and absorb the remaining 8% yourself.
Does Your Business Qualify for Small Employers' Relief?
You qualify if you paid £45,000 or less in Class 1 National Insurance in the last complete tax year before the employee's qualifying period (GOV.UK). That figure ignores any reductions like the Employment Allowance, so use your gross NI liability, not the amount you actually paid over after reliefs.
In our experience, this is where small employers trip up. A business claiming the full Employment Allowance might pay very little NI in practice, then assume it sits above the threshold. The test looks at your gross Class 1 NI before that relief.
The status is checked against the tax year before the qualifying week, which for maternity is 15 weeks before the baby is due. Grow past £45,000 in NI and you drop to the 92% rate for future leave.
The Payments You Can and Cannot Reclaim
Small Employers' Relief covers the statutory family-leave payments: maternity (SMP), paternity (SPP), adoption (SAP), shared parental (ShPP), parental bereavement (SPBP), and the newer neonatal care pay (SNCP), which became available from April 2025.
It does not cover Statutory Sick Pay. Employers cannot reclaim SSP at all under current rules, whatever the size of the business. That matters more now that SSP applies from day one of sickness, because the cost sits entirely with you.
The 2026-27 flat rate for the parental payments is £194.32 a week, up from £187.18 the year before (GOV.UK). SMP starts at 90% of the employee's average weekly earnings for the first six weeks, then drops to the flat rate for the remaining 33 weeks.
What the 109% Actually Gets You
The numbers make the case better than any explanation. Take an employee earning £600 a week on average who takes the full 39 weeks of statutory maternity pay.
The first six weeks pay 90% of earnings, so £540 a week, which comes to £3,240. The next 33 weeks pay the flat rate of £194.32, adding £6,412.56. Total SMP paid over the leave is £9,652.56.
A small employer reclaims 109% of that, so £10,521. You get back around £869 more than you paid out. A larger employer on 92% reclaims £8,880 and carries roughly £772 of the cost. On a single maternity leave, the gap between the two rates is about £1,641. What we see most often is businesses reclaiming at 92% when they were entitled to 109%.
How Do You Claim It Back?
You reclaim through an Employer Payment Summary (EPS) sent to HMRC (GOV.UK). Your payroll software works out the recoverable amount each period, and the EPS reduces the PAYE you owe HMRC for that month.
Send the EPS by the 19th of the following tax month so the reduction lands against the right liability. If you have already paid your full PAYE bill and cannot offset the reclaim in-year, you can write to HMRC's PAYE Employer Office and ask for a repayment instead.
One question clients always ask is whether they need to claim leave by leave. You do not. The EPS carries a running total of statutory payments recovered, so it handles multiple employees on leave in the same period without a separate claim for each.
What If You Cannot Afford to Pay It Upfront?
If paying the statutory amounts would leave you short, you can apply to HMRC for the funding in advance rather than waiting to reclaim it (GOV.UK). This is worth knowing for a small team where one long maternity leave is a real cash-flow event.
You apply through HMRC's online service using your Self Assessment, VAT or Corporation Tax sign-in details, and you can apply up to four weeks before you want the first payment. Apply earlier than that and HMRC may send it back.
Get the figures right. HMRC can charge a penalty of up to £3,000 per employee, per tax year, if an advance funding application contains incorrect information.
Frequently Asked Questions
Is the 9% a rate cut or an increase from last year?
It is an increase. The compensation element rose from 8.5% in 2025-26 to 9% from 6 April 2026, so the total reclaim went from 108.5% to 109%. The rate was only 3.5% as recently as 2024-25, so small employers now recover meaningfully more of their employer National Insurance.
Can I reclaim Statutory Sick Pay under this relief?
No. Small Employers' Relief only applies to statutory family-leave payments. SSP cannot be reclaimed by any employer under current rules, so the full cost of sick pay stays with your business.
What counts towards the £45,000 threshold?
Your total gross Class 1 National Insurance for the last complete tax year, before any reductions such as the Employment Allowance. If that figure is £45,000 or less you qualify for the 109% rate; above it you reclaim 92%.
When do I actually get the money?
You recover it by reducing your PAYE payment to HMRC through the Employer Payment Summary in the same period you make the statutory payment. If you cannot offset it in-year, HMRC will repay you, or you can apply for advance funding before the payments start.
Does the neonatal care pay count?
Yes. Statutory Neonatal Care Pay, available from April 2025, is one of the family-leave payments covered by Small Employers' Relief, so a qualifying employer reclaims it at 109% alongside maternity and paternity pay.
Not sure whether your payroll is reclaiming statutory pay at the right rate? Get in touch - we handle payroll for UK small businesses and can check your Employer Payment Summary, confirm your Small Employers' Relief status, and make sure you are recovering every pound HMRC allows. It's also worth reviewing this alongside your wider 2026 payroll checklist.