UK Statutory Leave Pay: What Your Payroll Engine Has to Handle Correctly

April 2026 brought the most significant reform to Statutory Sick Pay (SSP) in decades — the Employment Rights Act 2025 removed the three-day waiting period and lower earnings limit entirely, making SSP a day-one right payable to all eligible workers at the lower of £123.25 per week (flat rate) or 80% of average weekly earnings. Neonatal Care Leave and Pay also arrived in April 2025 as the first new statutory payment type in years. Family-related payments rose to £194.32 per week (flat rate) from April 2026. Further ERA 2025 provisions are scheduled through 2027.

Here we cover the 7 statutory payment types, where calculations most commonly break, and how Intermezzo handles the complexity within our API.

The UK statutory payment landscape

Seven main payment types, each with distinct eligibility rules and calculation mechanics:

Statutory Sick Pay (SSP) is now payable from day one of sickness absence for all workers. Low earners receive 80% of average weekly earnings rather than the flat rate, which introduces a per-employee earnings calculation that didn't previously exist. The 28-week maximum per period of sickness remains. Linked periods (two absences separated by eight weeks or fewer) count toward that maximum as a single continuous period.

Statutory Maternity Pay (SMP) runs for 39 weeks: 6 weeks at 90% of average weekly earnings (AWE) with no cap, then 33 weeks at the lower of the family-related flat rate or 90% AWE. AWE is calculated from the 8-week reference period ending with the last normal payday before the qualifying week, and includes all payments subject to NIC (National Insurance Contributions): basic pay, overtime, commission, and bonuses paid in those weeks. 

Statutory Paternity Pay (SPP) pays for up to 2 weeks at the lower of the family-related flat rate or 90% AWE. From April 2026, paternity leave itself is a day-one right, but SPP still requires 26 weeks' service. That split between leave eligibility and pay eligibility must be modelled.

Statutory Adoption Pay (SAP) mirrors SMP in structure. Only one adopting parent can claim SAP; the other may take paternity leave or shared parental leave.

Statutory Shared Parental Pay (ShPP) pays up to 37 weeks, shared between two eligible parents. Each parent is paid at the lower of the flat family-related weekly rate or 90% of their own AWE for the weeks they take. The available ShPP pool depends on how much maternity or adoption leave has been surrendered, which the system must track per employee.

Statutory Parental Bereavement Pay (SPBP) and Statutory Neonatal Care Pay (SNCP) both follow the same rate structure. SNCP, introduced April 2025, provides up to 12 additional weeks for parents whose baby requires neonatal care. It doesn’t reduce SMP or ShPP entitlements; the system must sequentially extend the employee’s total leave block without eroding their original leave pool.

Where calculations break in practice

AWE calculation. Average weekly earnings for SMP, SAP, and related payments use the statutory reference period, not a general pay average. The reference period is payment-type-specific, and includes all earnings paid in those weeks: basic salary, overtime, commission, bonuses. A system using a stored annual salary figure to derive AWE will be wrong for any employee with variable pay, for instance.

Linked periods of incapacity. Two sickness absences separated by 8 weeks or fewer are treated as a single linked period, which matters for the 28-week SSP maximum. A system that treats each absence as a fresh entitlement will allow employees to receive more than 28 weeks of SSP and fail to flag exhaustion of entitlement, causing a massive headache for payroll admins when done incorrectly.

Leave and pay eligibility divergence. The Employment Rights Act 2025 created a structural split for paternity and parental leave: employees can take the leave from day one of employment, but receiving pay during that leave still requires 26 weeks' service. The same pattern applies to SPBP. A system that conflates the two will either deny leave to new starters or incorrectly pay them.

Sequential leave extensions (SNCP). A common error is attempting to process SNCP concurrently with other statutory leaves. Per ACAS and Gov.uk guidelines, Neonatal Care Leave must be taken after Statutory Maternity or Adoption Leave, but can be taken before or after other pre-booked statutory parental leaves (such as Paternity or Shared Parental Leave), extending the family leave block sequentially. If a payroll system runs SNCP concurrently, it will underpay the employee and incorrectly shorten their total protected leave period. Furthermore, ShPP pool calculations depend on when the mother or primary adopter changes the date they end their maternity or adoption leave. A purely rigid leave model breaks for any employer whose employees use these entitlements in combination.

Employer recovery. Employers reclaim statutory payments by declaring the amounts paid in their monthly Employer Payment Summary (EPS) to HMRC, which offsets them against the employer's PAYE liability. Standard employers recover 92% of the amount paid; those qualifying for Small Employers Relief (broadly, gross Class 1 NIC liability of £45,000 or less in the prior tax year) recover 109%. SSP is not recoverable by employers of any size and is excluded from EPS recovery claims. Recovery amounts for all other statutory payments must be correctly disaggregated by payment type across SMP, SAP, ShPP, SPP, SNCP, and SPBP in the EPS submission.

How Intermezzo Handles Statutory Pay

The leave/pay eligibility split is modelled explicitly. Because the system tracks leave eligibility and pay eligibility independently per payment type, a new starter can take paternity leave from day one without the system incorrectly triggering SPP and without requiring a manual override to prevent it.

AWE is calculated from actual pay run history, not a stored annual salary figure. The 8-week reference period for SMP is identified automatically, and all required pay elements (basic salary, overtime, commission, bonuses) are included via wage type flags. Variable-pay employees are calculated correctly without manual intervention.

SSP logic reflects the April 2026 structure from the ground up. There are no waiting days to count, no lower earnings limit to check, and the 80% earnings floor for low earners is calculated per employee against their actual weekly earnings. Linked period identification runs against the 28-week maximum correctly so the system flags entitlement exhaustion rather than allowing more than 28 weeks of SSP to accumulate across linked absences or requiring manual checks.

Statutory leave pools stay independent. SNCP is tracked as its own entitlement pool, separate from SMP and SPP so that taking neonatal care pay never reduces the number of weeks of maternity or paternity pay an employee is otherwise owed. ShPP weeks recalculate automatically when the mother's or primary adopter's leave end date changes, so the available pool is always accurate without a manual adjustment each time an end date moves.

Employer recovery is calculated at the correct rate and reported correctly in the EPS. Small Employers Relief eligibility is assessed against prior-year Class 1 NIC liability automatically, and recovery amounts are disaggregated by payment type in the EPS submission so HMRC receives the figures it needs to offset against the employer's PAYE liability without manual reconciliation.

Rate and rule changes apply via configuration, not deployment. The April 2026 SSP reform, day-one rights, and rate increases applied with effective dating. Intermezzo architects our payroll API so that updates due to new regulations flow through automatically, without rewrites on your side.

The maintenance burden going forward

The Employment Rights Act 2025 is being phased in through 2026 and 2027. The April 2026 wave is now in force. Further provisions such as bereavement leave expansion, zero-hours protections, and unfair dismissal reforms are scheduled through 2027, each requiring the payroll engine to be updated.

For a payroll software company, that's an ongoing compliance maintenance commitment on a piece of the product that doesn't differentiate your offering. Powering statutory leave pay through Intermezzo's API means your customers get correct entitlements and accurate HMRC reporting, and the ERA 2025 timetable is maintained by our team versus yours. To discuss UK statutory leave pay coverage or explore the API, book a demo with us below.