Occupational v Statutory Sick Pay
When employees get sick and need time off work, understanding what money they’ll receive is important for everyone involved. In the UK, employers handle sick pay in two main ways: through the legally required Statutory Sick Pay (SSP), and through optional enhanced company schemes called Occupational Sick Pay (OSP).
This blog explains how these two systems differ, how they can work together, and how employers can create effective sick pay policies that meet legal requirements while supporting their workforce.
Understanding Statutory Sick Pay (SSP)
Statutory Sick Pay is the minimum payment that employers must provide by law to qualifying employees who are too ill to work.
As of April 2025, SSP is set at £118.75 per week and can be paid for up to 28 weeks.
- To qualify for SSP, an employee needs to earn at least £125 per week (this is the same amount as the Lower Earnings Limit).
- SSP doesn’t start immediately – there’s a three-day waiting period, meaning payment begins from the fourth consecutive day of illness, counting both working and non-working days.
- For illnesses lasting more than a week, employees typically need to provide a fit note from their doctor.
Remember that SSP isn’t optional – it’s a legal requirement that employers must fulfil for eligible staff members.
What makes Occupational Sick Pay (OSP) different?
Occupational Sick Pay goes beyond the legal minimum. It’s an enhanced sick pay arrangement that employers choose to offer as an employee benefit. While not legally required, these schemes are common in many workplaces and usually provide more financial support during periods of illness.
With an OSP scheme, employers might continue to pay all or part of an employee’s regular salary when they’re sick. These schemes vary widely between employers, with some offering just a few weeks of enhanced pay while others might provide several months. Many employers link the amount of sick pay to how long an employee has worked for the company, with longer-serving staff receiving more generous benefits.
A common approach might look something like this:
- For employees who’ve worked less than a year – 1 month at full pay, followed by 1 month at half pay
- For those with 1-3 years of service – 2 months at full pay, then 2 months at half pay
- For staff with over 3 years of service – 3 months at full pay, followed by 3 months at half pay
How top-up arrangements work
When employers offer both SSP and OSP, they need to decide how these payments will work together. There are two main approaches to this coordination.
The first approach is to pay OSP on top of SSP. Here, the employer pays the legally required SSP amount and then adds extra money to reach the level promised in their occupational scheme. This method requires careful tracking of both payment types separately.
The second and more common approach is to include SSP within the OSP payment. The employer simply pays the full amount promised in their occupational scheme, with the understanding that this payment includes the SSP portion. This is usually simpler to manage and easier for employees to understand.
For example;
If an employee normally earns £500 per week and their employer offers full pay for the first four weeks of illness, they would receive their usual £500 per week. The employer wouldn’t pay £500 plus the SSP amount of £118.75.
Creating effective sick pay policies
When designing a sick pay policy that works well alongside the SSP requirements, employers should consider several important factors.
Eligibility
The policy should clearly explain when employees become eligible for enhanced sick pay and how this relates to their SSP entitlement. Some employers might offer OSP from day one of employment, while others might require a probationary period to be completed first.
Calculations
The policy should also be clear about how payments are calculated. If using a top-up arrangement, explain how the SSP and additional amounts work together. If including SSP within OSP payments, make this clear to avoid confusion.
Length of service
Many employers choose to increase sick pay entitlements based on how long employees have worked for the company. If your policy does this, spell out exactly how service length affects entitlement, with clear timeframes and amounts.
Activation day
Another consideration is whether your occupational scheme will cover the initial three-day waiting period when SSP isn’t payable. Some generous employers choose to pay from the first day of absence, while others maintain the same waiting period as SSP.
Managing sick pay effectively
Good administration is essential for sick pay systems that combine statutory and occupational elements.
Record keeping
Employers should keep detailed records of all sickness absences to ensure they’re paying the correct amounts for the right periods. These records also help identify patterns of absence that might need addressing.
Employee communication
Clear communication is vital. Employees should understand exactly what they’ll receive when they’re sick and for how long. This information should be included in employment contracts and staff handbooks, and managers should be able to explain it when needed.
Consistency
It’s important to apply sick pay policies consistently to all employees to avoid claims of unfair treatment or discrimination. Having a written policy that’s followed in all cases helps achieve this consistency.
Reviewing policy
It is also important to regularly review sick pay policies. Employers should check that their approach remains competitive with similar employers, affordable for the business, and compliant with any changes in legislation.
When coordinating occupational sick pay with SSP, employers must make sure they meet certain legal requirements. The occupational scheme cannot be less favourable than SSP – it must at least match the statutory minimum for eligible employees. The policy must also avoid discrimination based on protected
characteristics like age, gender, disability, or pregnancy. Although it is important to add that SSP cannot be paid when an employee is getting Statutory Maternity Pay.
Once established, the terms of an occupational sick pay scheme become part of employees’ contracts and cannot be changed without proper consultation and agreement. Employers must also inform employees about their sick pay entitlements as part of their written statement of employment particulars.
Common challenges
Employers often face several challenges when managing sick pay. One common issue is the complexity of administration, especially when tracking different entitlement levels based on service length. Using integrated HR and payroll systems can help by automatically calculating the correct payments.
Another challenge is ensuring consistency across all policy documents and contracts. It’s worth reviewing all these materials to make sure sick pay is described and calculated consistently throughout.
Preventing misuse of sick leave without penalising genuine illness is another common concern. Many employers find that conducting return-to-work interviews and having clear absence management procedures helps address this balance.
Example scenario
Let’s look at how one company successfully integrated their occupational sick pay with statutory requirements.
ABC Insight is a marketing agency with 50 employees. Their sick pay policy took the following approach:
For the first three days of sickness, employees receive full pay through the occupational scheme. This covers the waiting period when SSP isn’t payable.
- For weeks 1-4 of sickness, employees continue to receive their full normal salary. This payment includes the SSP amount – it’s not paid on top.
- During weeks 5-12, employees receive half their normal pay plus SSP, as long as the combined amount doesn’t exceed their regular salary.
- After 12 weeks and up to the maximum 28 weeks, employees receive SSP only.
- The company also rewards longer service, with each completed year adding an extra two weeks of full pay entitlement, up to a maximum of 12 additional weeks.
This approach gives employees clarity about what they’ll receive during illness while creating a structure that rewards loyalty and is financially sustainable for the business.
Creating a well-thought-out approach to sick pay benefits both employers and their staff. For employers, good sick pay arrangements can help attract and keep talented people, reduce unauthorised absences, and show a commitment to employee wellbeing. For employees, clear and fair sick pay provides financial security during illness and allows appropriate recovery time without financial pressure to return too soon.
The most successful sick pay policies find a balance between generosity and financial sustainability. They provide clear information that everyone can understand while maintaining some flexibility for exceptional circumstances. They meet all legal requirements while also reflecting the organisation’s values and culture.
When reviewing your own sick pay arrangements, remember that what works for one organisation may not work for another. Consider your workforce demographics, industry norms, financial situation, and the message you want to send about how you value your employees’ health and wellbeing.
