I understand that if an employer pays his employee SMP, then he can reclaim SMP.
How is this done?
Is it through NI and PAYE (Ie he deducts it from NI and PAYE he has to pay to HMRC)
How much is reclaimable. I have heard there are two amounts you can reclaim. (103% or 92%)
Surely if it is 103%, he is actually benefiting from an individual being on maternity leave?
Replies (17)
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EPS mechanism - SMP
A monthly EPS should be filed under RTI from the payroll software being used.
The amount of SMP recoverable should be computed by the software, and running a P32 in the software should show this credit.
By filing an EPS HMRC should credit the PAYE account for the recoverable SMP.
If the SMP recovery exceeds PAYE/NIC/CIS liabilities then a funding request can be made to HMRC.
Benfiting?
An employee on maternity leave is not doing any work on behalf of the company, but that work still needs to be done. However, the person on maternity leave is entitled to return to their job when that leave is up. Unless an employer is exceptionally lucky, they are unlikely to be able to employ a really skilled person for such a short period. They are more likely to need a temp, with higher cost, or somehow get that work done by other staff, with their workloads suffering accordingly.
Given the limits on SMP, that additional 3% reclaim (which is only available to smaller employers anyway) is unlikely to be compensation enough.
Happen .....
It's compensation for the NI you pay.
.... but it's a rough and ready measure.
SMP Compo
In what way? I thought employers pay NIC at 13.8%.
If someone is on maternity leave, would NIC be payable maternity pay?
Yeah, but it's not 13.8% on all of it, is it ? There's a threshold.
As I said, it's a rough and ready measure.
SMP - like SSP - is subject to NIC. But, often the employee doesn't earn enough to pay it.
The 92% is for large employers, the 103% is for small ones.
From the horse's mouth
To quote last year's E15 from HMRC:
"If your annual liability for Class 1 NICs is £45,000 or less you are entitled to:
• 100 per cent of the SMP, and
• an additional amount as compensation for the NICs you pay on the SMP. The compensation rate for 2013–14 is 3 per cent."
Employer guidance
There used to be a downloadable comprehensive guide .pdf labelled E15, This useful .pdf guide I think, as a search for an upto date one on HMRC website failed to find a recent version, might have been replaced by disjointed guidance on .gov.uk.
Here's the relevant page:
https://www.gov.uk/recover-statutory-payments
Just shows
lionofludesch PM | Sun, 03/08/2014 - 09:06 | Permalink
@lionofludesch
"You can't believe what HMRC say in their manuals"
No, the break even point for SMP with 103% reclaim in 2014-15 is £451 per week of earnings. Pay below that and you recover more than it costs, pay above and you recover less.
I would like ....
.... to know if anyone has actually recovered exactly the NIC that they paid.
Just idle curiosity, obviously.
Can't be exact
So if a father gets some SPP and has his pay topped up to above the NI threshold, did he pay NI on his SPP or on his wages?
??
He pays NI on what he's paid.
Then the employer would recover NI on wages paid as opposed to SPP.
Yes - it's nonsense
He pays NI on what he's paid.
Then the employer would recover NI on wages paid as opposed to SPP.
Indeed. Although HMRC say that it's compensation for employer's NIC, it's no more than a gesture. There are winners and losers.
Try this one - employer's NI is different for SPP paid to weekly paid and monthly paid employees. Yet the compensation is still 3%.
Getting confused
The reclaim is based on the amount of the gross SMP/SPP paid, not the amount of NIC associated with it. Anything on top of that is not included in the reclaim calculation.
Whether the reclaim is at 92% or 103% is based on how much NIC the business pays as a whole, not just on the employees on SMP/SPP.
If the SMP/SPP plus any additional amount paid on top is high enough to breach the NIC limits, then NIC is calculated on the whole amount in the same way as any other payment of wages. The NIC is only related to SMP/SPP insofar as that pushes the payment over the limits.