As we move through 2025, employers need to prepare for updates to statutory rates that impact key areas such as parental leave, sick pay, and redundancy calculations.
HM Treasury has recently consulted on changes to Statutory Payment policies that will impact payroll software and employer reimbursements. These changes are set to take effect from 6 April 2025 and will bring significant updates to the compensation rates for various statutory payments.
Currently, employers can reclaim 92% of the following statutory payments made to employees:
For businesses that have paid £45,000 or less in Class 1 National Insurance in the last complete tax year (excluding any reductions like Employment Allowance), they qualify for Small Employers Relief. This allows them to reclaim 100% of the statutory payment, plus an additional 3% compensation.
Starting from 6 April 2025, the compensation rate for employers who qualify for Small Employers Relief will increase from 3% to 8.5%. This means that eligible employers will be able to reclaim 108.5% of the statutory payments from HMRC. The statutory payments affected by this change include:
The threshold for Small Employers Relief will remain at £45,000.
These changes are designed to provide additional financial support to small employers, helping them manage the costs associated with statutory payments. Employers should ensure their payroll software is updated to reflect these new rates and thresholds.
For detailed guidance on the updated rates and thresholds for the 2025 to 2026 tax year, employers can refer to the latest documentation provided by HM Treasury. The GOV.UK website will also be updated with this information in due course.
Stay informed and prepared for these upcoming changes to ensure compliance and take full advantage of the increased compensation rates.
Preparing for statutory rate updates can be complex, but you don’t have to navigate it alone. Our SD Worx payroll experts are here to help you adapt seamlessly, ensuring compliance and efficiency in your processes.
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