Sick pay for employees falls into two broad categories: Statutory Sick Pay (SSP) and Contractual Sick Pay (CSP). All employees are entitled to SSP when unable to work with the exception of:

  • Employees on strike
  • New starters who are sick on the first day of employment (liability for SSP can apply if the new employee starts work but falls sick part way through their first day)
  • Employees whose earnings are less than the Lower Earnings Limit (LET) in the relevant period prior to being off work
  • Prisoners
  • Pensioners (i.e. employees over the age of 65)
  • Pregnant employees in the disqualifying period (i.e. in the 6 week period prior to birth, in this case they are paid Statutory Maternity Pay – SMP). Pregnant employees cannot receive SSP and SMP in the same week
  • Employees who fall sick outside of Europe, only if the employer is not liable to pay employers' Class 1 National Insurance Contributions to that employee
  • Employees who have used their maximum SSP entitlement of 28 weeks in a 3-year period with any one employer
  • Employees on fixed-term contracts of three months or less
  • Special circumstances occur for employees that have more than one employer, more than one job while working for the same employer or are self-employed as well as working for the employer. Generally in these cases the gross wages are added together and National Insurance Contributions (NICS) paid on the whole sum and the employee is entitled to one lot of SSP
  • Married women and widows who pay reduced rate NICS can qualify for SSP if they meet certain criteria
  • Members of the armed forces, including reserve forces are not entitled to SSP

Rules regarding notification of sickness should be clearly communicated to employees either in the written statement of employment particulars or through a staff handbook. Usually, an employee contacts a designated representative at the start of the working day/night on each day of absence.

Employers may choose to use self-certification forms for short periods of absence, while a doctor's note is usually appropriate for 7 or more days of absence. Certification evidence may be particularly important where there is a contractual sick pay scheme.

Notification of sickness is the point at which employers should consider the employee's entitlement to SSP:

  • Qualifying employees are only entitled to SSP if there is a period of incapacity for work (PIW) for four or more calender days in a row
  • All days of incapacity including holidays, weekends and any other days which the employee would not normally be expected to work count towards PIW
  • Employers pay SSP for Qualifying Days (QDs) – these are the days of sickness when the employee should have been at work. Employers usually pay SSP from the fourth day of the PIW, never the first 3 days of the PIW
  • Rules apply equally for part-time employees
  • The rate of SSP for the financial year 2004-05 is £66.15. It is payable from the 4th QD and thereafter for a period of 28 weeks
  • SSP must be paid along with gross pay, therefore any deductions made from gross pay will also be made from SSP
  • Employers should keep records of SSP, information may be required on forms P14 at the end of the tax year
  • SSP stops as soon as the employee returns to work. If the employee is off sick for longer than the maximum 28 weeks, employers should complete the Inland Revenue form SSP1 and send it to the employee without delay. The employee will use this form to claim incapacity benefit
  • Employers may be entitled to recover the SSP paid to employees under the Percentage Threshold Scheme

An employer may choose to provide higher than required levels of sickness payment in place of SSP, this is known as Contractual Sick Pay (CSP). This is at the employer's discretion and levels, lengths and any qualifying conditions should be stated in the employee's written statement of terms of employment.