HMRC has confirmed an increase to the Small Employers’ Relief (SER) compensation rate from 6 April 2026. The change applies to the 2026/27 tax year and affects the amount eligible employers can reclaim when they pay certain statutory payments to employees.
SER is part of the statutory payments recovery rules. In broad terms, employers pay statutory amounts through payroll and then reclaim some or all of that cost from HMRC. The reclaim percentage depends on whether the employer qualifies for SER, which is linked to the employer’s Class 1 National Insurance contributions (NICs) in the relevant prior tax year.
What is changing from 6 April 2026?
From April 2026, the SER compensation rate will rise to 9%. This compensation is paid on top of reclaiming 100% of qualifying statutory payments, meaning eligible employers will be able to recover 109% in total.
The increase is a one percentage point rise from the current 8.5% compensation rate. In practice, the change increases the additional amount employers can reclaim to help offset the indirect costs of administering statutory payments, such as payroll processing and managing absence-related cover.
For employers that do not qualify for SER, the standard recovery rate remains lower. HMRC’s published employer rates for 2026/27 continue to show that, where an employer’s total Class 1 NICs for the prior tax year exceed the SER threshold, they can generally recover 92% of statutory family-related payments.
Who qualifies for small employers’ relief?
Eligibility for SER is broadly determined by the employer’s total Class 1 NICs (both employee and employer contributions) for the last complete tax year, subject to the rules on calculating that figure. The commonly used threshold is £45,000, and guidance also highlights that certain reductions, such as the Employment Allowance, are ignored when assessing eligibility.
Because the test looks back to a prior tax year, an employer that grows quickly (or reduces headcount) may move in or out of eligibility from year to year. Employers may therefore need to confirm their status at the point they start reclaiming for a particular statutory payment case.
Which statutory payments are covered?
SER applies to statutory family-related payments that employers pay via payroll and reclaim from HMRC. These include:
- Statutory Maternity Pay
- Statutory Paternity Pay
- Statutory Adoption Pay
- Statutory Shared Parental Pay
- Statutory Parental Bereavement Pay
- Statutory Neonatal Care Pay
Separate rates apply to the statutory payments themselves, which are updated annually. For example, HMRC’s employer rates and thresholds for 2026/27 set out the weekly rates for statutory pay from early April 2026, including statutory family leave pay at £194.32 per week (or 90% of average weekly earnings if lower, depending on the payment type and period).
Rising employment costs and employment law changes
The SER change lands alongside other cost and compliance changes for employers in April 2026.
National Minimum Wage and National Living Wage rates are scheduled to increase from 1 April 2026, with the 21+ rate at £12.71 per hour and the 18–20 rate at £10.85 per hour (with other age and apprentice rates also updated).
In addition, the Employment Rights Act 2025 introduces a package of reforms with staged implementation. Acas guidance highlights changes taking effect on 6 April 2026, including paternity leave and ordinary (unpaid) parental leave becoming “day one” rights, and statutory sick pay becoming payable from the first day of illness rather than the fourth (alongside removal of the lower earnings limit for SSP eligibility).
Taken together, these changes can affect workforce planning, payroll processes, and absence management. The SER compensation uplift is targeted support for smaller employers who meet the eligibility test, but it does not change the underlying obligation to pay statutory entitlements correctly and on time.
Employers that expect to qualify for SER in 2026/27 may wish to ensure their payroll processes are set up to apply the correct recovery rate from 6 April 2026 and to retain the evidence needed to support a claim if queried.
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