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How FreeAgent handles statutory pay

This article explains which statutory payments are currently supported in FreeAgent and how these are handled.

FreeAgent supports the reclaiming of statutory maternity pay, statutory paternity pay, statutory adoption pay, statutory parental bereavement pay and shared parental pay. However, the reclaiming of statutory sick pay is not currently supported. Statutory sick pay can be entered into a payroll profile and onto a payslip in FreeAgent but will not be reclaimed.

If an employee receives the same amount of statutory payments each month, you can enter the appropriate statutory pay in their new or existing payroll profile as described below. However, if the employee will be receiving a different amount each month, you will need to edit the relevant payslip each month before filing the payroll to HMRC.

Please note that you will need full (level 8) access to FreeAgent to be able to add statutory pay to a payroll profile or payslip.

Small employers

Small employers are those that pay less than £45,000 a year in employer’s NI, excluding any reductions such as Employment Allowance. When a small employer pays statutory pay to one of its employees - which could be maternity, paternity, adoption or parental bereavement pay - HMRC will reimburse that pay plus 3%. FreeAgent supports the full 103% reclaim of statutory pay for small employers as described below.

Please note that if your business does not qualify as a small employer and can only reclaim 92% of the statutory pay, you will not be able to use FreeAgent’s payroll to reclaim the statutory pay. Instead, you will need to file your payroll outside of FreeAgent and post journal entries to record the payroll in your FreeAgent account.

Adding statutory pay to a new payroll profile

To add statutory pay as part of the process of creating a new payroll profile, navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.

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Select ‘Add an Employee’ from the right-hand side of the ‘Employees’ section and select the employee’s name from the drop-down menu. If the employee’s name does not appear in the drop-down menu, you will need to add them as a user.

Please note that each employee should have their own payroll profile and a profile should never be updated and used for another employee.

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Scroll down to the ‘Is this employee receiving statutory pay?’ section, select ‘Yes’ and enter the relevant details.

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Once you’ve entered the appropriate statutory pay, enter the remaining information and select 'Create Payroll Profile' to complete the process. For more information on creating a payroll profile, please see this article.

Adding statutory pay to an existing payroll profile

To add statutory pay to a payroll profile that you’ve already created, navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.

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Select ‘Edit Profile’ on the right-hand side of the ‘Employees’ section next to the relevant employee’s name.

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Scroll down to the ‘Is this employee receiving statutory pay?’ section, select ‘Yes’ and enter the relevant details.

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To complete the process, select ‘Update Payroll Profile’ at the bottom of the screen.

Adding statutory pay to a payslip

If the employee will be receiving a different amount each month, you will need to edit the relevant employee’s payslip before filing the payroll to HMRC.

To add statutory pay to an employee’s payslip, navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.

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Select ‘Prepare Month [X] Payroll’ in the top-right of the screen. ‘X’ will be the number of the month for which you’re filing payroll.

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Select ‘Edit Payslip’ to the right of the relevant employee’s name.

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Scroll down to the ‘Statutory Pay’ section and enter the relevant details.

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Select ‘Save Changes’ at the bottom of the screen to complete the process. For more information on editing a payslip, please see this article.

Repeat these steps each month before filing the payroll to HMRC.

How FreeAgent handles statutory pay

Once you have added statutory pay to a payroll profile or payslip, FreeAgent will automatically add the appropriate amount to the employee’s payslip when you prepare and run payroll each month.

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FreeAgent will automatically reclaim the statutory pay at 103%, and file both a Full Payment Submission (FPS) and Employer Payment Summary (EPS) to HMRC for you. You’ll see confirmation of this in the ‘Payroll Summary’ panel in FreeAgent.

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If you receive an advance lump sum payment of statutory pay from HMRC, please see this article.

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