When an employee becomes sick, they are still entitled to be paid. Adrian Hobbs explains the various sick pay options available to employers.
Even if an employer pays occupational sick pay (OSP) that is equal to or better than an employee’s entitlement to Statutory Sick Pay (SSP), this article sets out why they must still be able to prove that they have complied with an employee’s minimum SSP entitlement.
There are some important definitions for SSP purposes:
- 'Incapacity' means an employee is unable to perform their contractual duties by reason of some physical or mental condition, even if it is self-inflicted.
- 'Period of incapacity for work' (PIW) means a period of four or more calendar days, including days an employee does not normally work, during which they are incapacitated.
- 'Linking' PIWs are where there are 56 days or less between the end of one PIW and the start of the following PIW. Reasons that stop an employee from being paid SSP in an original PIW will apply to all other PIWs that link to it even if the employee’s circumstances have changed in the meantime.
- 'Qualifying day' (QD) means a day for which SSP is payable and a day an employee is normally contracted to work each week.
- 'Waiting day' (WD) means a qualifying day for which SSP is not payable (the first three WDs in an original PIW and any outstanding WDs in a PIW that links to that one).
Entitlement to SSP
An employee is only entitled to SSP if they satisfy the following requirements:
- The employee has a PIW. If the incapacity is for less than four calendar days, no SSP is due.
- Does the PIW link to an earlier one? Was the employee entitled to SSP for that PIW? If yes, he or she may be entitled to SSP in the current PIW. Helpbook E14[1] contains a table to help an employer calculate if PIWs link.
- Has the employee notified the employer of their incapacity? The earliest an employer can require this is at some time during the first QD the employee is absent. Notification can be given on behalf of the employee and sent by letter.
- Has the employee provided the employer with evidence of their incapacity? For days four to seven of the PIW an employee can only be required to self-certify their incapacity; from day eight and each week thereafter a medical statement can be required.
- Does the employee earn enough? An employee must have average weekly earnings over the eight weeks prior to the start of the PIW that are at least equal to the lower earnings limit for Class 1 NICs (£97 a week for the tax year 2010/11) that applied in that week. If they did not earn enough in an original PIW they are not entitled to SSP in any PIW that links to that one, despite their average earnings have subsequently increased.
Reasons why the employee is not entitled to SSP
There are a number of reasons why SSP is not payable. This is where the employee:
- has recently been in receipt of a social security benefit meaning they must be referred back to Jobcentre Plus if they become incapacitated again within a specified time (the dates will be shown on a Linking Letter that the employer has a right to ask to see);
- has their contract brought to an end or it has ended. An employer cannot end someone’s employment wholly or mainly to avoid paying SSP;
- will soon have been paid 28 weeks’ SSP in a single PIW or a number of linked PIWs. The employee should be warned of this at the beginning of the 23rd weeks’ payment of SSP, and again when they have received 28 weeks’ payment;
- does not have high enough earnings;
- is expecting a baby or has recently had a baby. A woman is disbarred from receiving SSP whilst she is entitled to statutory maternity pay (SMP) or the Maternity Allowance;
- has been sick on and off for more than three years; i.e. they’ve had a series of PIWs over the last three years all of which link;
- is involved in a trade dispute that started before they became incapacitated;
- is in legal custody or serving a term of imprisonment when they became incapacitated (if they are later taken into legal custody or sentenced to a term of imprisonment whilst incapacitated, the payment of SSP must stop);
- is working outside the UK when they become incapacitated and the employer is not liable to account for Class 1 NICs on their earnings; or
- has not yet started working for the employer.
If any of the above reasons apply, the employer must issue the employee with a form SSP1 as soon as possible and return any medicals statements, etc.
An employer may also decide not to pay or to stop paying SSP because the employee:
- failed to notify the reason for their incapacity;
- failed to provide medical evidence of their incapacity when requested; or
- refused to co-operate with the employer in assessing their capability for work.
The employer might also stop paying SSP if they have evidence that the employee is not actually incapacitated from doing their normal job. Whenever one of these reasons for non-payment applies the employer must issue the employee with written notification of the reasons for non-payment.
Paying SSP
SSP is a weekly payment that is paid according to the number of qualifying days the employee is incapacitated.
For example, taking the weekly rate of SSP at £79.15 for the tax year 2010/11 – an employee has an original PIW that starts on a Monday and ends a week on Friday. The employee normally works Monday to Thursday. The first Monday through Wednesday are waiting days for which SSP is not payable. Therefore, for the first week of the PIW the employee is due 1/4th of £79.15 = £19.79. For the second week, the employee is due a week’s SSP, £79.15, covering their qualifying days of Monday through Thursday.
Helpbook E15 contains a table that helps an employer calculate the daily rate of SSP.
Where an employer pays occupational sick pay (OSP), the amount of SSP due can be offset. For example, an employee is due a week’s payment SSP at £79.15. They are also entitled to OSP of £183.45. The amount of £79.15 is completely offset and the employee is paid £183.45. Alternatively, the employee is due OSP of £50. As this is less than their SSP entitlement, the employee should be paid £79.15 all of which is SSP.
SSP records
Even if an employer pays OSP that is equal to or better than any SSP entitlement, an employer must still keep the following records:
- the dates of the employee’s period of incapacity for work (PIW); and
- the qualifying days the employee is entitled to SSP.
These records should be kept for up to three years after the end of the tax year to which they relate. HMRC publish a form SSP2 record sheet that an employer can use.
Even if an employer pays OSP that is better than SSP they must still issue a form SSP1 when the employee starts receiving what would have been their 23rd weeks’ payment of SSP, and again when they would have been paid 28 weeks’.
Recovery of SSP from the State
An employer may be entitled to recover an amount of the SSP they pay but only if they satisfy the requirements of the Percentage Threshold Scheme. SSP can only be recovered if an employer calculates that for a particular tax month, it has paid SSP that exceeds 13% of its gross Class 1 NICs for that same tax month. Only the excess can be recovered.
For example, an employer has four employees, including himself, each being paid £2000 a month. The not contracted-out Class 1 NICs due on these earnings is £1449.88 of which 13% is £188.48. If the employer pays for more than 2.3 weeks’ SSP in the month they can recover the excess over £188.48. This could be a likely scenario.
However, the more employees and/or the higher their wages the greater will be 13% of the gross NICs due. A larger employer would need to experience excessive rates of incapacity among its employees to be in a situation of paying SSP over 13% of its NICs liability. That’s why it is generally only the very small employers that can recover any SSP they pay.
Incapacity control
If an employer thinks an employee has been away from work too long for their medical condition they can ask HMRC to get Medical Services to assess the employee’s capability for work. If an employee has a history of short absences for which there seems to be no real reason, the employer can once again involve HMRC and Medical Services in providing an opinion about the employee’s underlying medical condition. In both cases, the employee’s permission must be given in writing before the employer can approach HMRC. Helpbook E14 contains further information.
[1] HMRC publish booklet ‘E14 Employer Helpbook for Statutory Sick Pay’ which is currently available on the Employers CD-ROM and to download from the HMRC website.
See also: '10 top tips for managing sickness absence' by Victoria Cook in The People Bulletin, 16 June 2010.