There is often confusion around the rules of Statutory Sick Pay (SSP) and Company Sick Pay, and the regulations are likely to be changed soon by the Labour government.

If an employee is too ill to work for a period of at least four consecutive calendar days, this is called a ‘period of incapacity for work’ (PIW). These days may not necessarily be the employee’s working days; for example, they could be weekend days. Sickness which does not last for as long as four consecutive days will not be a PIW.

Once a PIW has been established, the next task is to work out which days are Qualifying Days (QDs). A QD is a day when the employee would normally be expected to be in work. For many employees, this is Monday to Friday.

You should establish which of those QDs are waiting days (WDs). The first three QDs in a period of sickness will be WDs. An employee will not receive any SSP for these three WDs. Presumably this rule was established in order to discourage employees from taking odd days off, which many employers find the most disruptive form of absence.

However, if the employee has had a recent PIW and the gap between that PIW and the new PIW is 56 days (eight weeks) or under, then the PIWs are said to be linked. The employee will have already done the three WDs in the first PIW and does not have to repeat them; the employee will be paid SSP from the first QD in the second PIW.

The Labour government has proposed removing the three waiting days, meaning that SSP will be payable from the first QD. It also intends to increase the rate of SSP, which is currently £116.75 per week. The likely consequence of this is that employees will be more willing to take a day off work, rather than struggling into the office, and some may be more inclined to ‘throw a sickie’, knowing that their financial loss will be lessened.

Given that sick pay costs will increase anyway, some employers are now considering introducing or amending Company Sick Pay. According to a benchmark survey by XpertHR, around 93% of organisations already offer some form of sick pay above SSP, although this figure is significantly reduced in small companies.

When drafting a Company Sick Pay policy, there are several options.

You could have a discretionary policy which is deliberately vague about how much sick pay would be given, to whom, and when. This gives you, as the employer, the most flexibility. It would still be advisable to have some guidelines (which the employees would not necessarily ever see) so that if in future you are asked to justify your decisions, you would be able to show that they weren’t discriminatory. Generally, acceptable factors to consider would be: length of service, seniority of role, nature of illness, whether illness was caused by working conditions, and previous sickness record. If an employee had a disability, you would probably give them a little more sick pay but there is no absolute legal obligation to do so. An example of this wording would be ‘You may, at the Company’s discretion, be paid some Company Sick Pay’.

Alternatively, you could keep the policy discretionary, but have guidelines included. If you did deviate from the guidelines, you would be required to justify it. Examples of situations when deviation may be acceptable are: financial difficulties within the Company, the employee was suspected of lying about being ill, or the illness was self-inflicted, for example due to participating in extreme sports. An example of this wording would be ‘You may, at the Company’s discretion, be paid Company Sick Pay at the rate of four weeks’ full pay; and then eight weeks’ half pay (pro-rata for part-time employees), in total in any calendar year.’

A third option is to set out exact rules, with which you will be obliged to comply. Although this gives you no flexibility, it also reduces the scope for employees to argue that your decision in any particular situation was unfair. If taking this approach, it is important to be precise and to think through all possible scenarios. Policies which allow a certain amount of paid sick leave per calendar year are administratively easier to calculate, but may result in employees seeing sick leave as an allowance to be used up, and a high rate of sickness at the end of December. Using a rolling year prevents this, but can quickly become complicated. Employers often pay sick leave at different rates, most commonly full pay at the beginning of sick leave, reducing to half pay after a few weeks or months. Sometimes payments also vary according to the length of service the employee has at the time of going off sick. Specially-designed software can help with such calculations.

Common mistakes when drafting policies are:

• Failing to specify whether a ‘year’ means a calendar year or a rolling year.
• In the case where sick pay is limited per calendar or rolling year, where a longer length of service results in longer periods of sick pay, and where sick pay is gradually reduced over the duration of the absence, confusion about how these dates and factors interact.
• Paying the employee for a limited number of ‘occasions’ of sick leave, without defining what an occasion is. Would returning to work for one day, then going off sick again mean that a new occasion had begun?
• Not explaining how sick pay would be calculated for workers with irregular hours.
• Not stating that company sick pay is topped up from, rather than paid in addition to, SSP.
• Omitting to mention, even though it is the employer’s intention, that probationary employees are not eligible.

If you have any questions or need help writing a sick pay policy, please contact us by emailing enquiries@perspectivehr.co.uk or by phoning 01392 247436.