Calculate Recovery and NIC Compensation Amounts Manually

The Employer Payment Summary (EPS) informs HMRC about any adjustments that must be made against the employer's tax and NI liabilities resulting from statutory payments to employees.

This includes year-to-date (YTD) recovery and NIC compensation amounts for these absence payment types:

• Statutory Adoption Pay (SAP)

• Statutory Maternity Pay (SMP)

• Statutory Paternity Pay (SPP)

• Statutory Sick Pay (SSP)

• Shared Parental Pay (ShPP)

If you want to reclaim statutory payment amounts, you must report these amounts each period on the EPS. Currently, the payroll runs don't automatically calculate recovery and NIC compensation amounts. To include them in the EPS, you must manually calculate these amounts and enter them as override values in the archive file produced by the EPS process.

Note: Alternatively, you can create a set of absence payments elements, indirect elements, and formulas to automatically calculate the recovery and NI compensation amounts and feed the predefined balances provided for this purpose. If you use this method, the EPS process automatically retrieves the correct recovery and NIC compensation amounts from the predefined balances.

Calculate the Recovery Amount

Before running the EPS for a statutory month, calculate the total eligible recovery amount for each absence payment type, for each tax reporting unit (TRU) you're reporting.

For example, if the total of all SAP payments for the period was 1000 GBP and the employer is eligible for a 92% recovery rate, then the total eligible SAP recovery amount would be 920 GBP. Add that amount to the previous period's YTD to derive the current period's YTD total.

Calculate the NIC Compensation Amount

You can calculate the NIC compensation amount for each absence payment type, for each TRU you're reporting. NIC compensation is only applicable when the recover amount is 100%. You can't claim NIC compensation where the partial amount of 92% is reclaimed.

Record the Calculated Amounts in the EPS Archive

Here are the steps to update the EPS archive to include the manually calculated amounts:

1. Run the Employer Payment Summary process.

2. On the checklist, click Go to Task for the View Employer Payment Summary Results task.

3. Open the archive file.

4. Enter the TRU-level YTD balances for each payment type in the appropriate override column.

5. Save the archive file.

6. Mark the View Employer Payment Summary Results task as complete so the process can continue.