How to Calculate Statutory Sick Pay (SSP)

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Statutory Sick Pay (SSP) or Period of Incapacity for Work (PIW) offers employees continuity of pay during sick leave absences. Employers often have the tough task of accurately calculating and paying exact amounts to ensure they are covered too. Dependent on a range of criteria, circumstances and time taken, sick pay can also look different for every employee, making an employer’s job even more complicated.

So, how can you accurately calculate statutory sick pay? The consequences of incorrectly or deliberately withholding sick pay could result in a complaint to HM Revenue and Customs (HMRC).

What are the criteria for receiving Statutory Sick Pay?

Understanding the criteria is crucial to the SSP calculation process. Since 2022, the conditions for Statutory Sick Pay (SSP) or Period of Incapacity for Work (PIW) require an employment contract alongside average earnings of at least £123 per week. Whilst these are not the only indicators, they offer little flexibility for employers to deny Statutory Sick Pay.

Employers need to discern if their sick employees meet the following eligibility criteria:

• Have a contract of employment with the company.
• Completed some work under that employment contract.
• Recorded sickness for four days or more, including non-working days.
• Earn an average of at least £123 per week.
• Give notice and proof of illness after seven days or when required.

It’s also worth noting that employees who have been paid less than eight weeks of earnings from their employer are still eligible for statutory sick pay. Likewise, if an employee takes annual leave during a period of absence, it does not interrupt their period of incapacity for work.

After 28 weeks, SSP will cease but can be followed up with other alternatives. Those who have exceeded the time frame and are not fit to return to work can apply for an Employment and Support Allowance (ESA) or Universal Credit.

How is sick pay calculated?

Unless you have an agreement with the employee for full pay or another payment system that offers them more than minimal requirements, SSP is calculated at £109.40 from April 2023. This continues for up to 28 weeks in total when an employee is off sick. The Period of Incapacity for Work (PIW) is calculated from four days of consecutive sickness and includes bank holidays, weekends, and other non-working days.

Across the 28 weeks, employees could receive a total of over £3,000, depending on individual circumstances and sick pay inflation. After this point, they can apply for ESA or Universal Credit if sickness persists. Either the employer or Government will typically pay this. An employer will continue to pay if the employee agrees to continue working once they have recovered or feel better.

Although the UK Government includes a handy sickness pay calculator tool, there will be some instances where you have to calculate this manually. Assuming your employees fit into the criteria for SSP, you’ll need to follow a set formula to calculate sick pay entitlements. So, how do you do it?

1. Check the weekly rate

As of April 2023, SSP totalled £109.40, increasing by just over £10 from 2022. SSP rates are always subject to change, that’s why it’s vital for employers to ensure they’re paying the correct rate. Employers must not pay anything below the weekly rate for qualified days of sick leave otherwise it could escalate to legal action by the affected employees.

2. Record the number of qualifying days

For employers, it’s worth remembering that SSP is not payable for the first three qualifying days and starts from the point the fourth day commences. In the instance that an employee has a total of nine days off sick, they can be paid SSP for six of those days.

3. Divide the weekly rate by the total days off sick

The next stage is to calculate an employee’s SSP allowance. Although three days are not eligible, these still equal the total number of days off sick. Dividing the weekly rate of £109.40 by nine (in this case) will give an accurate figure for daily sick pay.

4. Multiply daily allowance by eligible sick days

This is the final stage of the calculation for employers, and it will deliver an overall amount of SSP owed to the sick employee within the next corresponding pay period. In our example, only six days are considered eligible for the employee which means we’ll multiply the daily figure by six.

The calculation should appear like this:

Weekly Rate ÷ Total Qualifying Sick Days = SSP Daily Rate

SSP Daily Rate x Eligible Sick Days = Total to pay in SSP

For our example, it should look like this:

£109.40÷ 9 = £12.15

£12.15 x 6 = £72.90

When do you need to calculate statutory sick pay?

Statutory Sick Pay will need to be calculated and paid after an employee reports at least four consecutive sick days, which will include weekends and other non-working days. Employers will need to consider this when an employee calls in sick on day one but won’t need to action anything until day four starts.

However, if an employee arrives for work and is taken ill after they’ve clocked in, this isn’t recorded as a sick day. Instead, calculations will begin from the second day of illness and employers will calculate four days from this point before SSP starts. In the instance that an employee experiences multiple sick days throughout the year, but doesn’t take four sick days consecutively, this means there is no Period of Incapacity for Work (PIW) and an employer will not need to provide SSP.

It’s worth noting that employers are also responsible for paying SSP if they pay Class 1 National Insurance contributions for their employees (or equivalent depending on age and earnings).

Using payroll software for statutory sick pay calculation

Rather than manually calculating sick pay allowance, utilising payroll software ensures all relevant and clear information is displayed on an employee’s payslip. There are many benefits for employers, and employees, as payroll software will reduce the likelihood of human error, guaranteeing accurate sick pay for those experiencing a Period of Incapacity for Work (PIW).

· Managing different periods of sick leave times

Some years employees can take no sick days, whilst others might not be so kind. Managing different periods of sick leave can be challenging for employers, especially for record-keeping purposes. Payroll software provides employers and payroll staff with automatic calculations that are specific to each employee’s requirements. It will consider if sick leave has also been taken alongside other forms of leave, including bereavement.

· Managing sick pay alongside parental leave

With so many twists and turns facing employees throughout the year, there will inevitably be times when multiple absences are taken. In this instance, payroll software can support calculating SSP after an employee has taken a form of parental leave, offering no room for fault with pay calculations. Whilst the UK Government’s tool is helpful, it doesn’t cover or understand the full picture of an employee’s year or working pattern.

· Statutory annual leave calculations

Contrary to popular belief, holiday allowances can still be accrued whilst an employee is on SSP. Whether you employ ad-hoc workers or full-time staff, you’ll need to calculate annual leave allowance alongside sick days taken. Payroll software offers this solution by supporting employers with trackers as well as scheduled holiday pay. As well as supplying a consolidated solution to payroll, it also keeps calculations simple and automated.

· When an SSP ends or an employee is no longer eligible

Employers are required to submit an SSP1 form to an employee claiming SSP at least seven days before it is due to end. The SSP1 form ensures employees who are experiencing a prolonged period of work absence can receive benefits until they are fit and able to return.

Payroll software can support employers with routine SSP1 form submission and tracking employees who have been off sick for an extended period.

· Accurate SSP payments

Removing the possibility of human error ensures both employers and employees are protected from incorrect payroll occurring. Payroll software considers the correct calculations for employees based on their circumstances and leave agreements, ensuring accurate SSP is delivered on time with payday.

Staffology Payroll helps you with continuity of pay for employees on sick leave

Our software supports employers, ensuring you are fully covered when it comes to managing staff absences. Your employees will also experience continuity of pay that accurately reflects Statutory Sick Pay on their payslips.

Why not request a demo today?

Duane Jackson, May 15th, 2023

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