SMP Compensation

Dottie Registered Posts: 99 Regular contributor ⭐
How do you deal with the small employers compensation for statutory maternity pay in the accounts. Is it contra'd against employers NI, shown as other income and added back in the tax computation or something else?

Thanks in advance.


  • payrollpro
    payrollpro Registered Posts: 427 Dedicated contributor 🦉

    The amount is recovered from the PAYE payment, as two sums, 100% recovery plus a 4.5% compensatory amount so it either counts as miscellaneous income, some people do it that way, or it reduces the employers costs for NIC and comes back that way.

    Some organisations assume the amount is due back when they charge the labour costs in the accounts whilst others account for the total and then write back the recovery and compensation when they physically reduce the payment to be made to the accounts office.

    There is no hard and fast way, as far as I am aware.

    The technical definition is that it compensates the employer for nIC's paid on the SMP so I would agree with you that it reduces the employers NIC so however you account for the ERS is how you would deal with it.

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