What is ‘sick pay’?
‘Sick pay’ is the payment of wages or salary to an employee when they are unable to attend work due to illness.
Sick pay can come in two forms:
a) Contractual sick pay (or company sick pay): earnings that a contract of employment states that an employee is entitled to receive in the event of sickness resulting in absence from work; or
b) Statutory Sick Pay (SSP): earnings that the law says most employees are entitled to receive if they are off sick from work.
Are all employees entitled to sick pay?
Most employees are entitled to sick pay in one form or another.
If, for instance, a contract of employment provides that an employee will receive company sick pay equal to their regular earnings, there is no need for SSP (or, alternatively, they will only receive their regular earnings minus the SSP).
However, if company sick pay is not payable under a contract of employment, an employee will only be entitled to SSP.
Details of company sick pay entitlement should be included in an employee’s contract of employment and provided to them within two months of starting work. If the company does not offer a company sick pay scheme, this should be stated in the employment contract, company handbook or related materials.
Can an employer specify which employees are eligible for company sick pay?
An employer is free to specify that an employee must qualify in order to receive company sick pay.
Normally, this means an employee must work for the company for a minimum period of time – for example, a six-month probationary period – before they become eligible for company sick pay.
Is there a legal minimum amount payable under a company sick pay policy?
A company sick pay scheme can give an employee more than the amount of earnings due under SSP and they may pay out for longer.
Although company sick pay may not necessarily be the normal rate of pay, it cannot legally be less than SSP.
Can an employer choose to pay an employee statutory sick pay rather than company sick pay?
Some company sickness policies state that an employer can administer company sick pay at their discretion – and may choose to pay employees SSP instead.
However, in these circumstances, an employee can legally challenge their employer, who would need to demonstrate why company sick pay was not paid, despite the employee meeting the employer’s criteria for eligibility.
The legal challenge to the employer would take the form of a breach of contract claim (a sickness policy forms part of the employment contract) and/or a claim for unlawful deduction from wages (sick pay is considered earnings for income tax purposes).