Statutory Sick Pay Guide for Employers

An introduction to this SSP Guide for small businesses, covering the period 6th April 2012 to 5th April 2013

Statutory Sick Pay Guide for Employers

Periods of Incapacity for Work (PIW)

How long has your employee been sick?

They must be sick for four or more days in a row to be able to get SSP from you. If your employee has been sick for four or more days in a row and sick absence continues but they are not entitled to SSP, you must complete form SSP1, or your own version, no later than 7 days from the first day of notification of sickness, so that they can claim Employment and Support Allowance (ESA) from Jobcentre Plus or in Northern Ireland the Jobs and Benefits Office.

Linking Periods of Incapacity for Work (PIW)

Where a Period of Incapacity for Work (PIW) is separated from an earlier PIW by a gap of not more than eight weeks, (that is 56 days), the two absences ‘link’ and are treated as one PIW.

A PIW must always be formed before there can be a link,so your employee must be sick for at least four or more days in a row (non-working days and non-qualifying days count) otherwise there is no later PIW to link with the earlier one. The PIWs do not have to be for the same sickness or incapacity for them to link

Odd days of sickness do not form a PIW and cannot link. The tables for linking periods will help you work out if your employee’s PIWs link.

Example of linked PIWs’:

  • your employee is sick from 21 August to 27 August and is entitled to SSP
  • this spell of sickness is four or more days, it forms a PIW and SSP may be due
  • the employee is sick again from 22 September to 24 September
  • the second spell of sickness is less than four days.It therefore does not form a PIW and is not covered by the SSP Scheme
  • the employee is sick again from 23 October to 31 October
  • the third spell of sickness is four or more days so a PIW is formed. The gap between 27 August and 23 October is 56 days so the two PIWs link and no Waiting Days would need to be served for the third spell of sickness.

Example of PIWs that link but no entitlement to SSP:

  • your employee is sick from 21 August to 27 August and has formed a PIW
  • however, the employee’s earnings are below the LEL and so there is no entitlement to SSP
  • the employee is sick again from 22 September to 15 October and has again formed a PIW
  • in the second spell of sickness the employee’s earnings have increase above the LEL, so SSP would be due
  • both PIWs link but as there was no entitlement to SSP for the first spell of sickness, then there is no entitlement to SSP

Has your Employee Earned Enough in the Relevant Period?

Use the amount actually paid before deductions such as PAYE, NICs and pension contributions.

Average Weekly Earnings (AWE) should include all earnings that attract a Class 1 NICs liability, or would if they were high enough.

Such earnings would consist of:

  • any salary or wages (including cash allowances – for example, car allowance) and money paid in the period earned outside the period, such as holiday pay, overtime and lump sums paid for arrears of pay
  • any other element of the person’s earnings which is chargeable to Class 1 NICs (including in very limited circumstances Class 1B)
  • shares or share options
  • retail and other vouchers (where the cost is taxable under the P11D procedure and subject to Class 1 NICs)
  • Statutory Sick Pay
  • Statutory Maternity Pay
  • Ordinary Statutory Paternity Pay
  • Additional Statutory Paternity Pay
  • Statutory Adoption Pay.

SSP entitlement depends on your employee’s AWE in are levant period. You will need to work out the dates of the relevant period and how much, on average your employee has been paid in that period. See How to work out the relevant period to see if they qualify but if you are in any doubt or your employee disagrees with your decision, you must work through the detailed checksheet.

For help online go to www.hmrc.gov.uk/paye/tools/basic-paye-tools.htm for an interactive SSP calculator or have a look on your Basic PAYE Tools where you will find a calculator and a learning program to help you understand your SSP responsibilities.

Where a salary sacrifice arrangement is in place, see paragraph below titled Salary Sacrifice.

When to include earnings from PAYE Settlement Agreements and subject to Class 1B NICs

If an employee does not qualify because their AWE in the‘relevant period’ are less than the LEL, you must check whether they received any benefits or expenses, which would otherwise have attracted Class 1 NICs liability,within the ‘relevant period’, but were subject to a PAYE settlement Agreement and Class 1B NICs.

If they did, you must recalculate their AWE to include these expenses and/or benefits, on which Class 1B NICs were paid, to see if they qualify.

Overpaid/underpaid earnings during the relevant period

Calculation of AWE is always based on all earnings actually paid to the employee within the relevant period, regardless of any over or underpaid wages in that period.

So where over or under payments of wages occur within the relevant period, they are treated in the same way as all other earnings paid in that period for calculating AWE to decide if SSP is due.

Mistimed payments

A mistimed payment occurs when the date of the actual payment of earnings is made earlier or later than the normal contractual payday. It is important that the following provision is only applied to regular payments of earnings paid other than on their normal date, for example due to a Bank Holiday. This type of payment should not be confused with a payroll error. For example, a mistake is made in the payroll resulting in a shortfall of pay when working out the AWE in the relevant period.

If you have paid an employee’s wages earlier or later than the normal contractual payday at the beginning or end of a relevant period because of a particular event, such as an annual holiday, you should divide the total earnings by the number of weeks’ wages that you have paid rather than the number of weeks in the relevant period.

For example, a weekly paid employee is taking two weeks paid holiday so you pay them three weeks’ wages on the last payday before they take their leave. They go sick six weeks after their holiday. The relevant period for SSP starts on the first day of their holiday. This means that you only paid them six weeks wages during the eight week relevant period as you had paid their wages form the first two weeks before the beginning of the relevant period.

To give the correct AWE you should divide the total earnings actually paid in the relevant period by six, as the earnings represent only six weeks’ wages.

Employee not paid any wages throughout the relevant period

Where an employee is not paid any wages to which they are entitled in the relevant period you must use the employees normal weekly earnings as stated in their contract of service to consider whether their earnings for SSP purposes are equal to or above the LEL. Failing to pay wages due in the relevant period does not discharge your liability to pay SSP

Multiple or changed pay frequency in the relevant period

Where, for example, an employee normally has both weekly and monthly paydays or they change from weekly to monthly paid within the ‘relevant period’, the average (unrounded figure) in each pay pattern is calculated separately then added together to get the total AWE.

Salary sacrifice

If an employee has entered into a salary sacrifice with you, their AWE is calculated using the amount of earnings actually paid to them during the relevant period. For more information on salary sacrifice go to www.hmrc.gov.uk/specialist/salary_sacrifice.htm

Non contractual benefits

For the purposes of calculating AWE for SSP the calculation is based on earnings which are subject to NICs.

Some schemes for childcare support provided by you and made available to your employees may be exempt from PAYE tax and Class 1 NICs such as childcare vouchers.

The value of childcare vouchers provided during a period of sickness may not be deducted from SSP.

Where an employee agrees to accept childcare vouchers as part of salary sacrifice, their SSP entitlement will be assessed on their gross earnings on which NICs are payable.

For further information on the treatment of childcare vouchers and other contractual benefits and expenses, go to www.hmrc.gov.uk/paye/exb

Therefore the value of any benefits which are exempt from Class 1 NICs (such as some childcare vouchers) will not be included in the AWE calculation.

Employees with more than one job with you

Your employee could have more than one job with you.

If the employee’s earnings from all their jobs with you have to be added together to work out Class 1 NICs they also have to be added together to work out the employee’s AWE for SSP purposes, and the employee can only get one lot of SSP.

If Class 1 NICs are worked out separately on the employee’s earnings from each job, you must work out their AWE separately, and the employee can get more than one lot of SSP.

For more information on how to work out Class 1 NICs for employees with more than one job see CWG2 (2012) Employer Further Guide to PAYE and NICs (PDF).

New employees who have not had eight weeks earnings yet

Employees who have not worked for you for long enough for the normal AWE rules to apply, or have worked for you before in a previous contract which doesn’t link with the current contract, fall into two groups.

Employees who have not received:

  • payments covering at least eight weeks at the time the PIW begins, and
  • any payments at the time the PIW begins.

Use these checksheets to work out the AWE.

Earnings do not cover eight weeks

Where the last normal payday before the PIW has been established but previous paydays covering at least eight weeks’ pay have not, regulations provide for an employee’s AWE to be calculated differently. In these circumstances calculate it using the period represented by all the earnings, paid under the contract before the first day of sick absence, as the ‘relevant period’.

The method depends on whether the employee has or has not been paid for an exact number of weeks.

Employee has received an exact number of weeks pay

Where an employee has not received eight weeks earnings and has received an exact number of weeks pay the AWE is calculated by using the period represented by all of the earnings paid under the contract before the first day of sickness. So if the employee only received five weeks earnings the AWE is calculated by dividing the total of the 5 weeks earnings by 5.

Employee has not received an exact number of weeks pay

When an employee has not received eight weeks earnings and has not received an exact number of weeks pay the AWE is calculated by using the period represented by all of the earnings paid under the contract before the first day of sickness. So if the employee only received 2 weeks and 3 days earnings the average weekly earnings is calculated by dividing the total of the 2 weeks 3 days (17 days) earnings and multiply by seven regardless of the number of days a week the employee is expected to work.

No earnings yet paid

Where the employee falls sick before they have had their first payday, you should use their contractual earnings to see if they earn enough to get SSP.

Work out how much a week they will earn based on the due rate of pay for their job. If their AWE will be £107.00 or more they will qualify.

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