A Quick Guide To Statutory Sick Pay
What happens if your employees are too sick to carry on working? By law, you have to pay your employees and workers Statutory Sick Pay (SSP) when they meet the eligibility criteria. This post aims to outline who qualifies for SSP, the reasons employees may not be eligible for SSP, and what happens if there is a dispute in the decision.
Who qualifies for Statutory Sick Pay?
To qualify for SSP an employee must:
- Have a contract of employment
- Have carried out work under their contract
- Have been sick for more than 4 days in a row (this can include non-working days) this is known as a period of incapacity for work (PIW)
- Earn at least £120 per week
- Give you the correct notice
- After 7 days of illness, give you proof of illness.
This sounds pretty straightforward, but there can be complications such as the type of employment your worker has.
Casual, zero hour contract and agency workers
These workers are treated as employees for PAYE and Class 1 National Insurance Contributions.
For these to be entitled to SSP, all of the qualifying conditions need to be met.
The period for which SSP is due is different depending on whether the employee has had 3 months of continuous employment with you.
These 3 months do not have to be immediately before the PIW and are not broken by periods of sickness or annual leave. It is also not affected by whether or not you are unable to offer work. They can be broken by a trade dispute, such as strike action, or if the worker has been given written termination of contract.
Educational term-time workers
Entitlement to SSP will depend on the type of contract you have with these workers.
If your worker doesn’t have a contract outside of term-times they are not entitled to SSP outside of their contract, for example, if they become sick during the school holidays. This is because they are not an employee during those weeks.
If their contract ends and then a new one starts their entitlement will stop at the end of their contract. If their PIW is either between contracts or when their new contract should have started, they are not entitled to SSP. This is because they are only entitled if they have worked under the contract.
If their contract continues between term-times entitlement to SSP will continue during and after the holiday periods either until the end of the contract or the end of the PIW.
The entitlement to SSP depends on when the company was incorporated.
Companies incorporated on or after 1st October 2009
The new Articles of Association allow directors to determine a director’s remuneration. In such cases, payments of directors’ fees are regarded as earnings for the purpose of entitlement to SSP.
Companies incorporated before 1st October 2009
An ordinary resolution is required to determine the director’s remuneration, this will have to be calculated by using an annual figure.
Directors that are paid contractually
If a director is paid a regular salary, their Average Weekly Earnings can be calculated like any other employee.
Directors that are paid by a determination of the directors (not a formal vote)
You need to calculate the Average Weekly Earnings by adding the monies paid and any other payments of earnings. Use the date that the monies were paid instead of the date of the shareholders’ resolution to determine the total earnings during the relevant period.
Directors that are paid only by a formal vote
If the director is only paid by a formal vote, calculate their Average Weekly Earnings in the usual way, substituting the dates of the formal votes in place of the normal paydays.
Directors that are paid both contractually and by formal vote
A director who’s paid contractually may also be paid a bonus or fees by a formal vote. You must calculate their Average Weekly Earnings like any other employee, but you should only include the monies votes by formal vote if the date of the vote falls in the relevant period.
Reasons employees don’t qualify for SSP
There can be a number of reasons that an employee doesn’t qualify for SSP. If any of these apply, you will need to notify them via Form SSP1 within 7 days of the first day you are notified of their illness.
The employee is then able to use this form to support their application for benefit from the Department of Work and Pensions.
When you are filling out the form, you will need to tick the box which corresponds to the reason you are not paying SSP. These reasons are:
- The employee has claimed Employment Support Allowance during the last 12 weeks
- The employee’s contract is for a fixed period and has ended
- You have brought your employee’s contract to an end
- The employee will soon have been getting SSP for 28 weeks, or they have already had it for 28 weeks
- The employee’s average earnings before their illness were not high enough
- The employee is either expecting a baby soon, or they have just had a baby
- The employee has been sick on and off for more than 3 years
- The employee was away from work because of a trade dispute which started before the first day they were sick
- The employee was in legal custody or was serving a term of imprisonment when they became sick
- The employee was working outside of the UK on the day they first became sick and you were not liable for Class 1 NI on that day
- The employee has not started working for you yet
Your employee may not agree with your decision not to pay them SSP. If this happens they can ask HMRC to make a formal decision about it. These decisions are made strictly in accordance with the facts and the law.
As an employer, you cannot ask HMRC to make a formal decision on your behalf, but you can ask for an informal opinion. To do this you will need to contact the Statutory Payments Disputes Team via phone on 03000 560630.
If you do not agree with the decision made by HMRC, you will be given the full details of the appeal rights with the notice of the decision. Once you have notified the appeal to the Tribunal, they will consider the appeal. Tribunal decisions are final, except that you can appeal on a point of law, with leave, to the Upper Tribunal.
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