Do I have to pay sick pay?
Most employees are entitled to claim Statutory Sick Pay for the first 28 weeks of sickness after which time they are transferred to Invalidity Benefit or State Sickness Benefit (SSB) which may be available earlier if the employee is not able to claim SSP. Temporary workers who are paid subject to PAYE and NI contributions are also entitled to Statutory Sick Pay, providing they meet the statutory criteria applicable to all employees.
The legal obligation to pay SSP is contained in the Social Security Contributions and Benefits Act 1992 (the 1992 Act and the Statutory Sick Pay Scheme are the Statutory Sick Pay (General) Regulations 1982) (The 1982 Regulations).
Who is entitled to SSP?
Statutory sick pay is payable to all employees, and agency workers paid PAYE even though they may be engaged on contracts for services. For ease, any reference in this section to employers and employees shall also include employment businesses and agency workers. An employer is liable to make a payment to an employee who has a day’s incapacity for work in relation to his/her contract provided all other considerations of the scheme are satisfied.
The definition of an employee under the 1992 Act includes anyone who is over the age of 16, employed in Great Britain and subject to income tax under Schedule E. This is extended by Regulations to include “employed earners” and this category includes temporary workers supplied by an employment business to provide a “personal service subject to the supervision direction or control” as to the way in which they provide their service of the person to whom they are supplied.
The description of an “employed earner” includes a temporary worker who is engaged by an employment business under a contract for services and who is supplied to a client. Therefore, temporary workers are deemed to be “employed earners” and consequently are to be treated as “employees” for the purposes of the Statutory Sick Pay Scheme.
Prior to 27 October 2008 agency workers only qualified if they worked on an assignment or a series of assignments totalling 13 weeks or more. The case of HMRC v Thorn Baker Limited and others determined that Agency workers whose contracts are for a specified period of three calendar months or less are not entitled to SSP with the result that an agency worker on a fixed-term contract for less than three months is not entitled to SSP.
Since 27 October 2008 the Fixed Term Employees (Prevention of Less favourable Treatment) (Amendment) Regulations 2008 has entitled all agency workers to claim SSP from day one and without any qualifying period.
To summarise, a person will be eligible for SSP if they are either:
An employee with a contract of service; or
to be treated as an employee if they are an “employed earner” who renders a personal service and is subject to supervision, direction or control and who is paid by a third party or where fees are charged by a third party for the continued employment of the person employed i.e. an agency worker.
In the following circumstances an “employee” will not be entitled to claim SSP:
- Normal weekly earnings of the “employee” are less than the lower earnings limit for NI contributions which is subject to change in each tax year. If there are no normal weekly earnings, then an average must be calculated from gross earnings that attract National Insurance contributions before any deductions. The period of calculation is eight weeks ending with the last payday before the period of incapacity for work began
- During a period of 57 days ending immediately before the relevant date, the “employee” had at least one day on which he/she was entitled to invalidity pension, sickness benefit or maternity allowance. The receipt of benefits during any absence will normally be notified to you on a form that the “employee” will be given by the Department for Work and Pensions
- The “employee” has done no work for his employer under his contract (e.g. a temporary worker has not started an assignment with an employment business)
- The “employee” is away from work because of participation in a trade dispute
- The “employee” is, or has been, pregnant and the relevant date for ascertaining liability for SSP falls during maternity leave
- The “employee” is in police custody or is in prison on the first day of their incapacity for work.
- The “employee” is outside the EU area at any time on the first day of the period of incapacity for work.
The 1992 Act lays down certain circumstances in which the exclusions cannot apply and reference should be made to Schedule 11 of the Act if there is any question as to whether someone is excluded from liability.
If an “employee” is not entitled to Statutory Sick Pay by law, a Form SSP 1 should be completed by the employer, which will enable the “employee” to claim Social Security Benefit. The form must be given or sent to the “employee” no later than seven days after they have notified the employer of sickness. Any doctor’s notes and other documentation relating to the period of incapacity for work should be returned to the employee with the SSP 1.
Who is liable to pay SSP?
Employment businesses, as well as other organisations that employ staff, fall within the definition of “employer” under the 1992 Act if they are liable to pay Secondary Class 1 National Insurance Contributions in relation to any earnings of their “employees” under a contract.
How does a worker qualify?
There are three qualifying conditions for entitlement to SSP. Entitlement can only arise if all these conditions are satisfied. They are:
- That the day of sickness falls within a period of at least 4 consecutive days known as the “period of incapacity for work”;
- That they are employed at the time and it falls within the “period of entitlement”; and it falls on a “qualifying day” i.e. in practice a day on which they would normally work
- Period of Incapacity for Work (“PIW”)
An employer is liable to pay SSP provided the “employee” is off sick on a day on which they would normally work as part of a “period of incapacity for work” (PIW). That period must be four or more consecutive days of sickness and can include Saturdays and Sundays if they normally work on those days. If there are less than four consecutive days there is no PIW and you need take no action.
SSP is not payable for the first three Qualifying Days (QDs) in a Period of Incapacity for Work (PIW). These are called Waiting Days (WD).
If an “employee” has more than one period of sickness, each of which lasts for four or more calendar days in a row, and those two periods of incapacity for work are separated by periods of no more than eight weeks, i.e. 56 days, they will be treated as one single PIW. The effect of this is that if Statutory Sick Pay is payable in respect of the first PIW, it will automatically be payable for the second PIW. A series of periods of incapacity for work will therefore be linked if the breaks in between are no more than eight weeks in duration. The maximum entitlement is still 28 weeks. However, if there is a break of more than eight weeks between periods of incapacity for work, the maximum liability of 28 weeks will begin again. For example, Worker X is absent for 2 weeks but returns to work for 12 weeks and is then absent again for a further period of 28 weeks. In that case, the employer’s liability for that worker will be 30 weeks.
It is not necessary for the sickness to start on a QD, for example where the sickness began on a day when they would not be working. Where PIWs are linked and not all of the three WDs have been served in the first PIW, the remaining WDs must be served at the beginning of the next linked PIW. But once served there is no need for them to be served in any further linked PIWs.
Period of Entitlement
Any day of incapacity for work must fall within a period of entitlement. This begins with the commencement of a PIW, i.e. the first day of sickness, and ends when the employer’s liability towards that “employee” ceases, when the first of the following occur:
- Termination of that PIW, i.e. the employee is no longer ill;
- The day on which the employee reaches his maximum entitlement to statutory sick pay (a total of 28 weeks);
- The day on which the “employee’s” contract with the employer concerned expires or is brought to an end;
- In the case of an “employee” who is or has been pregnant the day immediately preceding the maternity pay or maternity allowance period.
The third condition for SSP eligibility is that the day of incapacity for work is a “qualifying day”. A qualifying day is a day of the week when the employee is required by his contract with that employer to be available for work or a day or days which is/are chosen to reflect the terms of that contract. Where qualifying days are determined by agreement between an employee and his employer, there shall be at least one qualifying day in each week (beginning with a Sunday). So a contract should specify which day or days of the week are to be qualifying days.
Where the contract does not specify a qualifying day or the days on which the employee must be available for work, the 1982 Regulations provide that the qualifying days will be either:
- The day or days on which an “employee” is or was required to work for that employer; or
- If the employer and “employee” agree that there are no specific days on which an employee is required to work, the qualifying day will be the Wednesday in any week;
- If the employer and “employee” cannot reach agreement about the days on which an employee is or is not required to work, the qualifying days will be days that none of the employees are or were required to work, e.g. Saturdays and Sundays.
- On the basis that temporary workers are generally free to work when they wish and cannot be “required” to work on any particular day of the week, it is open to an employment business to argue that the qualifying day will be the Wednesday in each week worked in accordance with paragraph (b) above. This would have the effect of reducing liability to those cases where a worker is absent due to sickness for a period of at least four weeks.
However this argument should be used with caution and only in relation to the truly casual worker who works intermittently with no set pattern of work.
Statutory sick pay - when is SSP payable?
An employer is required to pay SSP on the usual payday, i.e. the first day on which the employee would have been remunerated for his work on the day for which he/she is claiming SSP.
Statutory Sick Pay is only paid for qualifying days. The daily rate is the weekly rate divided by the number of qualifying days in the week for which you are paying SSP. If there is only one qualifying day a week, the entire weekly rate is payable for absence on that day. For SSP purposes, weeks begin on a Sunday.
SSP is treated like pay and so deductions for PAYE, Income Tax and National Insurance Contributions must be made before payment.
An employer can treat any payment which counts as earnings for National Insurance Contribution purposes, e.g. wages or Occupational Sick Pay Scheme payments, as payments towards SSP for the same day, or vice versa.
SSP is not payable for the first three qualifying days in any period of entitlement. These are called “waiting days”. Therefore, if an employee agrees with his employer that he is required to work Monday to Friday and he falls sick so that he is unable to work on Tuesday, he will only be able to claim SSP if he remains off work through sickness Tuesday to Friday inclusive.
If an employment business can argue that the only qualifying day is Wednesday, there will be no SSP due until the worker has been away sick for four consecutive Wednesdays.