Employment Allowance and SER for Legal Entities

Eligible employers can configure UK legal entities in Dayforce to claim an Employment Allowance or Small Employers' Relief (SER).

The Employment Allowance can qualify the legal entity for a reduction in its National Insurance bill. For details about Employment Allowance and employer eligibility requirements, see the site https://www.gov.uk/claim-employment-allowance.

Important: As of 6 April 2020, there is no longer a flat-rate amount for the Employment Allowance. Employers must apply to be awarded an Employment Allowance, and the amount can be different for each employer. The amount is also cleared at the start of every fiscal year and must therefore be entered manually each year.

The SER can qualify a legal entity to reclaim certain amounts for statutory pay, (for example, Statutory Maternity Pay, Paternity, Adoption and Shared Parental Pay). Detailed information about partial and full recovery of SER, as well as the rules governing the effective start date and the calculation of SER, can be found at https://www.gov.uk/recover-statutory-payments.

Employment Allowance details and Small Employers' Relief are included in the EPS file transmitted to HMRC, which you can verify in the Tax Month Management sub-tab in Payroll > Post Commit Management, in the Tax Month Preview slide-out panel, in the EPS Summary tab.

Employment Allowance and Small Employers' Relief are both configured in Org Setup > Org Payroll Setup > Organization for a selected legal entity, in the Tax Setting section of the Tax Authorities tab for the National Insurance ER (employer) entry. These tax settings are start-date effective, because requirements can change at the start of the tax year. To allow for mid-year implementation, enter the start date that the parameters go into effect to ensure that the correct processing period is used for calculation.

The Tax Setting section for National Insurance ER (employer) contains the following options:

Agriculture Sector: Select this checkbox to indicate that the tax setting is for the agriculture sector. This is included in the EPS file.
Annual Apprenticeship Levy Allowance: If applicable, enter the annual apprenticeship allowance.
Eligibility for Employment Allowance: Select this checkbox to indicate that the employment allowance must be calculated.
Employment Allowance: Enter the annual employment allowance amount. As of 6 April 2020, the employment allowance amount must be entered manually every year.
Expected annual payroll exceeds Apprenticeship Levy Threshold: Select this checkbox to indicate that the annual payment exceeds the apprenticeship levy threshold and that the annual apprenticeship levy must be calculated.
Important: If you select this checkbox, you must also select one of the sector checkboxes or the State Aid Rules Do Not Apply checkbox, otherwise you will not be able to save this record.
Fisheries and Aquaculture Sector: Select this checkbox to indicate that the tax setting is for the fisheries and aquaculture sector. This is included in the EPS file.
Industrial Sector: Select this checkbox to indicate that the tax setting is for the industrial sector. This is included in the EPS file.
Road Transport Sector: Select this checkbox to indicate that the tax setting is for the road transport sector. Included in the EPS file.
State Aid Rules Do Not Apply: Select this checkbox to indicate that the tax setting is exempt from state aid rules.
Statutory Payment Recovery Type: Select one of the following options: None, Partial, or Full.
- None: The statutory recovery compensation isn’t applicable. This is also the option if the field is left blank.
- Partial: Recovery = Amount*92% and NIC Compensation = 0.
- Full: Recovery = Amount and NIC Compensation = Amount*3%.

The NIC Compensation values are calculated and displayed at the employee level for general ledger purposes in the same way as the recovery values. The values are also displayed in the Tax Month Management sub-tab for EPS and reported as RTI data items in the EPS file as follows:

97 - Value of NIC compensation on SMP year to date
98 - Value of NIC compensation on SPP year to date
99 - Value of NIC compensation on SAP year to date
100 - Value of NIC compensation on ShPP year to date