HR · 24 October 2016

Do I have to provide statutory sick pay as a small business owner?  

sick leave
Statutory sick pay is first paid after three waiting days, meaning workers don’t receive SSP for the first three days of sickness

Writing for Business Advice, assistant head of advisory at leading HR consultancy Peninsula, Kate Palmer, looks into the rules surrounding statutory sick pay and what first-time employers need to know.

Statutory Sick Pay (SSP) is a statutory payment available for eligible employees who are unable to work due to sickness.

Small business employers do not have a choice over whether they pay SSP – so long as an employee is eligible they are legally entitled to receive SSP.

Since 2014, employers are no longer able to reclaim the costs of SSP from the government and have to absorb these costs themselves.

Entitlement to SSP depends on whether the employee is eligible for the statutory payment.  To qualify for SSP the individual must fall within the definition of an employee which is, generally, someone employed under a contract of service.

There are extensions to this definition to cover other categories of worker, including apprentices and some agency workers.

The individual must have been off sick for a period of four or more consecutive days, including non-working days, to be classed as a “period of incapacity for work”.

The employee must also have told the employer about their absence in line with any company absence reporting requirements and have supplied evidence of their illness.

This is usually a self-certificate, for absences less than seven days long, or a fit note from the employee’s doctor if the illness as lasted for seven days or more. Additionally, the employee must have earned the current Lower Earnings Limit of at least £112 a week.

The government sets the amount of SSP payable to eligible employees and this is currently £88.45 per week. SSP is paid to the employee once they have served three waiting days, meaning they don’t receive SSP for the first three days of sickness which fall on their normal working days.

Once served, SSP is paid for every day the employee would normally work but are unable to because of their illness. If the employee returns to work, but then goes off again sick within eight weeks of their original sickness, these two sickness periods are linked.

The employee does not have to serve three waiting days for the second period and SSP is payable from the first working day of their absence from work. If eight weeks and a day has passed since the first period of sickness, the employee has to serve an additional three waiting days at the start of the second sickness.

The employee has a maximum entitlement of 28 weeks of SSP so, once the entitlement has been used, SSP is not payable for further periods of sickness. Employers don’t have to pay SSP for any day where the employee has come in and carried out some work before going off sick – even if the work is only for a minute.

There are also special rules regarding payment for sickness during maternity leave, where the employee is on strike on the first day of sickness and where they are working outside of the EU.

Employers can choose to offer more favourable terms to sick employees than those offered by the statutory scheme. Though this may be viewed as an additional expense which is not necessary, a financial incentive is likely to improve employee engagement and retention and could, in turn, reduce staffing costs and turnover.

If a contractual sick pay scheme is offered, the scheme needs to contain details such as the duration of the contractual entitlement to sick pay and the amount that will be paid, for example, if this is full pay for three months or half pay for three months and then SSP for the remainder of the sickness period.

Kate Palmer is assistant head of advisory at Peninsula

How do you carry out a staff appraisal as a small business owner? Find out here.

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Kate Palmer CIPD is the head of advisory at law firm Peninsula and is a member of its senior leadership team. She joined in 2009 having held a senior HR manager's role in another large company. With a specialist background in facilities management in the NHS, Kate offers a wealth of employment law experience. She's an expert negotiator - one notable case was with the NHS's trade unions over terms and conditions in the Agenda for Change pay system.