Sick Pay: a simple guide

At some point, all businesses will be affected by employee sickness.

In fact, an average 137 million sick days were taken by UK workers because of injury or illness in 2016 - around 4.3 days per person¹.

And while it often can’t be helped, employee sickness comes at a significant cost to employers - £522 for each person in 2015, though that could be as much as £835 in the public sector².

With the financial impact of sick pay being so significant, it’s important that all employers know what their obligations to employees are and what options are open to them.

Easier said than done, we know, which is why we’ve put together a handy guide of everything you need to know about sick pay, from how much you need to pay to who is eligible for it and what the different types of sick pay available are.

Statutory sick pay

Statutory Sick Pay (SSP) is the minimum amount you must pay workers when they are off sick.

At the time of writing (Nov 2017), SSP currently stands at £89.35 per week. Part-time workers are paid pro-rata.

This handy sick pay calculator can help you work out how much SSP your employee is entitled to.

You. All employers must pay Statutory Sick Pay for their workers. Previously, you could recover some SSP costs if you paid a certain amount out in a month under the Percentage Threshold Scheme. However, the scheme was scrapped in 2014 and funding was diverted into schemes which help employees on long-term sick return to work quicker.

SSP kicks in on the fourth day in a row that a member of staff is off sick – known as the ‘qualifying day’. You don’t have to pay them anything for the first 3 days of sickness – these are known as ‘waiting days’. With one exception - you do pay for those 3 days, if the employee has been off sick and getting SSP within the last 8 weeks.

Typically you stop paying Statutory Sick Pay when the employee returns to work. However, if someone is off on long-term sick, SSP stops after 28 weeks absence.

SSP also stops if employees have had linked periods of sickness, separated by less than 8 weeks, which have lasted for longer than 3 years.

You should also stop Statutory Sick Pay if an employee starts receiving statutory maternity pay or maternity allowance.

If you stop SSP and an employee is still off sick, you should complete form SSP1 and send it to the employee to help them claim employment and support allowance.

To qualify for SSP workers must:

• Have an employment contract and have done some work under it
• Earn at least £113 a week
• Have been sick for at least 4 days in a row, including non-working days
• Have given you correct notice, within the time limit set out by you ie before 9am on the morning they were first sick. You can’t insist that workers tell you in person or fill out a special form.
• Give you proof of their illness if they’ve been off for 7 days. This should be in the form of a fit note from their doctor. Find out more about fit notes on the gov.uk website.

You should pay SSP in the same way you pay wages - on your normal payday and deducting tax and National Insurance.

The rules around Statutory Sick Pay are different for some workers, including casual staff and term-time workers in the education sector. For more information on this, and the above points on SSP, check out gov.uk’s Statutory Sick Pay page.

Occupational sick pay

Occupational sick pay, also known as company sick pay and contractual sick pay, is your own sick pay scheme which goes above and beyond SSP.

You might ask why you’d pay more than you have to, especially given that sick pay places a significant financial burden on employers. However, many employers consider company sick pay a really great investment and a valuable part of their benefits package.

Like any staff benefit it can help you attract and retain the best workers, boost employee morale and productivity and increase staff loyalty.

Many workers would struggle to pay the bills if they had to rely on SSP for several months, so they see sick pay as an important issue.

That’s completely up to you – you can choose to add on a little bit extra, like paying workers for the first 3 days before SSP kicks in or topping them up by say, £50 a week. Or you can go the whole hog and promise to pay workers full salaries for a set period of time. The only rule is that your company sick pay can’t be less than SSP.

Again, it’s up to you to set the rules. You may want to open company sick pay to everyone from day 1 or have it as an extra perk for people who’ve worked for the company for a certain period. Remember, you have to pay SSP for any employees who don’t qualify for your company sick pay.

With company sick pay, you can use your discretion and make an exception and pay someone even if they don’t technically qualify for sick pay under your company rules. However, be careful, as you can open yourself up to discrimination claims if you treat employees significantly different.

You pay any company sick pay, so it’s important to think carefully about how much you can afford before setting up your policy.

Would it cause major financial problems if you had 2 or 3 members of staff on long-term sick, for example? Remember, there are numerous costs related to employee sickness, including providing cover and indirect costs such as loss of productivity to consider, as well as sick pay.

If you run your own company sick pay scheme and workers are entitled to sick pay that is equal to or more than SSP you can opt out of the SSP scheme. However, you should keep basic sick records.

Whether you are paying SSP or have your own company sick pay in place, it’s important to let staff know exactly where they stand.

Details of your employees’ sick pay entitlement, whether that’s SSP or company sick pay, should be set out in their written statement of employment particulars.

You also need to outline how employers should tell you they are sick. For example, do they need to call before a certain time in the morning?

If you offer a company sick pay scheme it’s important that you outline:

• How many days company sick pay people are entitled to.
• Who qualifies for company sick pay, i.e. do people have to have passed their probationary period or worked for you a certain number of years to qualify.
• Any situations when employees might not be entitled to company sick pay, i.e. if they are off work because they were injured playing a risky sport.

That last point refers to what’s called discretionary pay. Other scenarios could include an exclusion if someone hasn’t complied with your sickness policy or is going through a disciplinary procedure.

Wholly committing to company sick pay which is very generous to employees can work out very expensive. This gives you the freedom to be flexible.

However, whether your OSP is discretionary or not, you must treat all employees the same way, acting consistently and fairly. Discriminating against someone could leave you open to legal action.

Though you no longer need to keep a record of SSP paid, you should still keep records  of all employee sickness which lasts more than 4 days in a row in case of any dispute. Gov.uk’s SSP2 form is designed specifically for this.

Even if your company has fully opted out of SSP, it’s still good practice to keep records of dates of employee sickness lasting more than 4 days and all payments of company sick pay -again, in the event of any dispute, or if you need to show them to HMRC. 

Find out more about sick pay insurance.

^{1.https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/sicknessabsenceinthelabourmarket/2016}

^{2.CIPD absence management report 2016.}

^{3.https://www.gov.uk/employers-sick-pay/entitlement}