Statutory Leave Payroll

In the space of a week, your HR team notifies you that three employees are going on leave at the same time. One is expecting a baby and starts maternity leave next Friday.

One has been signed off sick with a serious back injury. One is taking paternity leave when his partner gives birth.

You now have three separate statutory obligations running simultaneously, each with different rates, different durations, different qualifying rules, and a different process for recovering what you’ve paid from HMRC.

Getting any one of them wrong creates problems: underpayments that expose you to employment tribunal risk, overpayments you cannot easily recover, or EPS submissions that miss the reclaim window. Most payroll errors in this area are not caused by ignorance of the scheme’s existence.

They are caused by treating each leave type as a variation of the others when in practice SMP, SSP, and SPP have distinct mechanics that do not transfer between them.

This guide covers every statutory leave type, the 2025-26 rates for each, the payroll steps you need to follow, how to reclaim via Employer Payment Summary, and what the Employment Rights Bill 2025 changes for SSP if enacted.

What are the UK statutory leave types and how do their 2025-26 rates compare?

The UK has five core statutory leave payments that run through payroll:

• Statutory Maternity Pay (SMP)
• Statutory Paternity Pay (SPP)
• Statutory Adoption Pay (SAP)
• Statutory Shared Parental Pay (ShPP)
• and Statutory Sick Pay (SSP)

Each has its own qualifying conditions, duration, and rate structure, and each must be reported and recovered separately.

The table below shows the 2025-26 rates effective from 6 April 2025.

SMP and SAP carry a higher first-period rate; SPP and ShPP do not. SSP sits apart on both rate and recovery: you cannot reclaim SSP through normal EPS submission unless you are a very small employer under a legacy scheme. The Lower Earnings Limit for SSP eligibility in 2025-26 is £125 per week.

How does Statutory Maternity Pay work in UK payroll processing?

SMP runs for up to 39 weeks. The first six weeks pay at 90% of average weekly earnings with no ceiling.

Weeks 7 to 39 pay at £187.18 or 90% AWE, whichever is lower.

Average weekly earnings are calculated using a set reference period: the eight weeks of earnings immediately before the 15th week before the expected week of childbirth (the qualifying week).

The operational friction here is timing. Your payroll software will usually calculate AWE automatically if you feed it the correct dates, but the qualifying week must be correct in the system before the SMP schedule generates.

A wrong qualifying week shifts the entire 39-week schedule and misaligns your EPS recovery.

Payroll steps for SMP

Once SMP is confirmed:

1. Record the expected week of childbirth and the employee’s first day of maternity leave
2. Calculate AWE using the reference period (eight weeks before the qualifying week)
3. Set up the SMP schedule in payroll with the two-rate structure (weeks 1-6 at 90%, weeks 7-39 at statutory rate)
4. Deduct PAYE and National Insurance from SMP in the normal pay run
5. Record statutory pay separately from regular wages in your payroll system for EPS reporting
6. Reclaim via EPS when submitting your monthly Employer Payment Summary to HMRC

The employee must notify you at least 28 days before starting leave and provide a MATB1 form. If you do not receive the MATB1 and cannot confirm the expected week of childbirth, you cannot start SMP.

This is a practical hold-up that recurs whenever HR passes notification late to payroll.

How does Statutory Sick Pay work and what do the waiting days mean for your payroll?

SSP pays £123.25 per week for up to 28 weeks. Currently, employees do not receive SSP for the first three days of sickness.

These are called waiting days, and they create a gap that matters if the employee returns quickly and re-qualifies for SSP within eight weeks of the previous absence.

Waiting days apply per absence episode, not once per illness. If an employee has a pattern of short absences, you must track each episode separately and apply waiting days each time, unless they fall within a linking period of eight weeks from the previous absence.

Linked absences count as a single period of incapacity, which removes the second set of waiting days but extends the maximum 28-week duration.

Payroll steps for SSP

SSP processing requires more manual record-keeping than SMP in most systems because each absence episode must be tracked individually.

1. Record the first day of absence and identify qualifying days (the days the employee would normally work)
2. Count three waiting days from the first qualifying day before SSP begins
3. Pay SSP at £123.25 per week (or 80% AWE if lower) for qualifying days only
4. Issue form SSP1 if the employee is not entitled or their SSP period ends, so they can claim Employment and Support Allowance
5. Keep absence records for three years as HMRC may request them

SSP is not recoverable through the standard EPS process. Most employers fund it in full. The exception was the Statutory Sick Pay Rebate Scheme introduced temporarily during COVID-19, which has now ended.

How does Statutory Paternity Pay work and what should payroll process differently from SMP?

SPP pays £187.18 per week (or 90% AWE if lower) for one or two weeks. Employees can take the two weeks consecutively or, from April 2024, separately at any point in the first 52 weeks after birth or placement.

The flexibility on timing matters for payroll because SPP can now appear in any pay period during that year, rather than in the immediate weeks following the birth.

There is no first-period higher rate with SPP. The single rate applies throughout.

The qualifying conditions require 26 weeks’ continuous employment before the qualifying week and average earnings above the Lower Earnings Limit.

Payroll steps for SPP

1. Collect Form SC3 (or written equivalent) at least 28 days before leave starts
2. Confirm qualifying conditions: 26 weeks’ service, earnings above LEL (£125 per week in 2025-26)
3. Pay SPP at £187.18 per week for the one or two weeks taken
4. Deduct PAYE and NI as normal
5. Record and reclaim via EPS in the period the SPP is paid

Because SPP can be taken in separate weeks during the first 52 weeks post-birth, flag the employee’s file so that a payroll team member unfamiliar with the case does not miss a late SPP entitlement appearing in a later pay period.

How do Statutory Adoption Pay and Shared Parental Pay fit into UK payroll?

SAP mirrors SMP in structure. The first six weeks pay at 90% of AWE and the remaining 33 weeks pay at £187.18 or 90% AWE, whichever is lower.

The qualifying week for adoption is the week the employee is notified of the match rather than an expected week of childbirth, which requires payroll to get the match notification date from HR rather than a MATB1 form.

ShPP applies when an employee and their partner decide to split the remaining leave after the first two weeks of maternity or adoption leave. ShPP pays at £187.18 per week for up to 37 weeks.

The operational complexity with ShPP is that the employee must provide a curtailment notice ending their own SMP or SAP before ShPP can begin.

Until the curtailment is received, do not start ShPP in the system, even if HR believes the arrangement is agreed.

Both SAP and ShPP are recoverable at the same rates as SMP and SPP through EPS. Keep notifications of match or curtailment on file; HMRC may request evidence if a compliance check covers these periods.

How do you reclaim statutory payments via Employer Payment Summary and what are the EPS rates?

• SMP
• SPP
• SAP
• and ShPP are all recoverable from HMRC through the Employer Payment Summary submitted via your payroll software as part of Real Time Information reporting

SSP is not recoverable through EPS for most employers.

Two recovery rates apply:

• Standard rate: 92% of statutory payments made. This applies to all employers who do not qualify for Small Employers’ Relief.
• Small Employers’ Relief (SER): 109% of statutory payments made. This applies if your total Class 1 National Insurance liability was £45,000 or less in the last complete tax year before the qualifying event.

The SER threshold is calculated on Class 1 NI paid before any Employment Allowance is applied.

This is the point where Employment Allowance and SER interact in a way that catches payroll managers out: Employment Allowance reduces what you pay HMRC, but HMRC assesses your SER eligibility on your gross NI liability before that reduction.

Check your payroll software reports the correct gross NI figure for the SER calculation, not the post-Employment-Allowance net.

To reclaim, your payroll software totals the statutory payments made during the tax month and includes them in the EPS. HMRC offsets the reclaim against your PAYE and NI liability for that period.

If the reclaim exceeds your monthly liability, the balance carries forward or you can request a repayment from HMRC in writing after the end of the tax year.

What is the furlough scheme and why does it still appear in payroll records?

The Coronavirus Job Retention Scheme (CJRS), commonly called furlough, ended on 30 September 2021. HMRC closed the scheme and clawback investigations for overclaimed grants are still running in some cases.

If you are managing payroll for an employer who used furlough, you may encounter residual issues: HMRC compliance checks on CJRS claims made between March 2020 and September 2021, NI adjustments from the furlough period, or pension records that need reconciling against the reduced pay periods.

Furlough pay was not statutory leave pay. It was a grant scheme and the processing rules were entirely separate from SMP, SSP, and SPP.

Do not apply EPS reclaim logic to furlough records. Furlough grants were reported separately through the CJRS portal, not through RTI or EPS.

What does the Employment Rights Bill 2025 change about SSP, and what should payroll prepare for?

The Employment Rights Bill 2025, currently working through Parliament, contains two significant changes to SSP that will affect payroll processing once enacted.

The first is the removal of waiting days. Under current rules, employees wait three qualifying days before SSP starts. If the Bill passes as drafted, SSP would become payable from the first day of sickness.

This means payroll systems will need to remove the three-day offset from absence records.

For employers with high absence volumes, this will also increase SSP costs because short absences that currently fall entirely within the waiting period would become payable.

The second change introduces a lower earnings band: employees below a threshold would receive a percentage of their earnings rather than the flat £123.25 rate, adding a calculation step that most payroll systems do not currently handle.

Both changes are subject to Parliamentary progress and a commencement date. As of April 2026, neither is yet in force.

Review your payroll software provider’s release schedule so you are not caught unprepared when a commencement date is confirmed.

Frequently asked questions about statutory leave payroll