Sick pay: A short guide for employers

Posted by James Arquette on 14/12/15 16:30

This content has now been updated. Please click here for our New 2019 Sick Pay Guide for Employers.

Are you confused about the obligations you have to your employees when it comes to time off for sickness? Is absence a problem for your organisation? Are you concerned that sick pay excesses are affecting your overall profitability?

Whether you operate in the public or the private sector, our short guide to sick pay will provide you with up-to-date information about your obligations, and advice on how to reduce your organisation’s sick pay outgoings.

Q: What types of sick pay are there?

There are two types sick pay: Statutory Sick Pay (SSP) and Company Sick Pay (CSP).

All organisations have to provide their employees with SSP – subject to the qualifying criteria being met – while CSP is a voluntary benefit provided by some employers to their employees.

Q: When are you required to pay SSP?

You’re legally obliged to pay SSP to all employees working under contract when they’re absent from work due to sickness, provided that they:

  • Earn more than £112 per week (2015/2016)
  • Have been off sick for 4 qualifying days – days an employee is normally required to work – or over

SSP is paid at the same time and in the same way as normal wages. However, it’s not payable for the first 3 days – known as waiting days – in a period of sickness. The weekly rate of SSP is £88.45 (2015/2016), with the maximum period of illness covered being 28 weeks.

  • Employees should tell you they are sick within your own time limit (or 7 days if you don’t have one)
  • You may withhold SSP payments for any days the employee was late in telling you (unless there’s a good reason for the delay which is acceptable to your organisation)
  • If you feel that an employee is not genuinely unable to work due to illness then, following investigation, you can withhold SSP
  • After 7 days off sick you’re entitled to ask the employee for a fit note (formerly a sick note) from their doctor, but you can’t withhold SSP if the employee is late sending you the note

Q: What about CSP?

Company Sick Pay forms part of an employee’s overall benefits package. You’re not legally obliged to provide it.

The amount and length of pay varies from organisation to organisation, and is subject to varied qualifying and eligibility requirements.

  • As it’s a benefit, you have a greater ability to restrict and dictate when a payment of CSP is made to, and withheld from, an employee
  • Any restrictions to CSP would not affect an employee’s statutory right to SSP payments   

Q: Can employees elect to use their holiday allowance when they’re sick?

With your consent, employees can use their annual holiday entitlement to ensure payment for days they are off work sick, in circumstances where:

  • Their entitlement to SSP has been exhausted
  • They don’t qualify for SSP
  • You don’t offer CSP benefit

Q: What problems could arise if you allow employees to use their holiday in this way?

If you’re trying to gain an accurate assessment of individual or collective attendance, then you’re likely to run into problems if you allow employees to use their holiday when they’re sick.

It means that employees are able to disguise their absence with annual leave – and makes it harder for you to address their poor attendance.

In addition, if this becomes your customary policy, you may find it difficult to justify your discretion from case to case, which can lead to challenges by individual employees.

Q: If you’ve overpaid an employee, is it possible to get your money back?

If one of your employees has received an overpayment for a period of absence, you may be able to recoup your funds.

In order to do so, you need appropriate consent from the employee, usually from their employment contract. Without it, you’re likely to be challenged for making an ‘unauthorised deduction’ from the employee’s wages. This could, ultimately, lead to an Employment Tribunal case.   

Q: Can you withhold Company Sick Pay?

If you provide contractual CSP (as opposed to non-contractual) and withhold the benefit from an absent employee where you don’t have the contractual right to do so, the employee may bring a breach of contract claim.

However, this would not affect relevant SSP payment.

Q: What are the main causes of overspending on sick pay?

Overspending on sick pay is a big problem for organisations across the public and private sector. Some common scenarios which lead to overpayment include:

  • Company Sick Payments being automatically made due to a failure to hold Return to Work (RTW) meetings
  • Failure to question or clarify reasons for absence, resulting in payments being made when an absence is not a genuine claim
  • Poorly written policies that allow employees to abuse the benefit of CSP without appropriate and reasonable challenge
  • Long term sickness not being closely monitored, leading to CSP being paid monthly until exhausted

Q: How can organisations reduce their sick pay spend?

There are straightforward practical steps you can take to reduce your spend.

  • Make your absence policy robust – It needs to clearly set out qualifying and eligibility requirements for the right to CSP benefit, and highlight any consequences of failing to comply with the policy and/or fraudulent claims or abuse of the policy
  • Ensure a strict RTW meeting process is implemented and maintained throughout your organisation
  • Carefully monitor employees on long term sick pay to minimise CSP abuse

Want more advice on how to reduce absence and increase profitability? Read our blog 'Employers braced for sharp increase in cold and flu absence'

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