Employer Handbook for Statutory Sick Pay

Has your Employee Earned Enough in the Relevant Period?

What counts as earnings?

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
• 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/calcs/ssp.htm for an interactive SSP calculator or have a look on your CD-ROM 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 in right-hand column of this page.

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

It is important that the following provision is only applied to regular payments of earnings paid other than on their normal date.

If you have paid an employee’s wages earlier or later than the normal 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 for 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.

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/payee/reporting-az.htm

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(2010) 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’.

So if the employee only received three days wages, the relevant period is three days. To get the average weekly figure divide the three days’ wages by three and multiply by seven regardless of the number of days a week the employee is expected to work.

Where the employee is paid multiple weekly or calendar monthly, and they have received only one payment before the PIW, the relevant period is the number of weeks the payment relates to.

For example, an employee is paid 3-weekly and receives only one 3-week payment before the start of their PIW.

To calculate the average weekly earnings, divide the payment by 3, as in Step 5 of the weekly checksheet.

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 £97.00or more they will qualify.

Rounding to the nearest whole month when there isn’t a whole number of months in the relevant period

For monthly paid staff, where there is a part month payment in the relevant period, between the dates at 2 and 1, use the checksheet.

When you get to Step 4 of the monthly checksheet, workout the number of rounded months as follows:

• count the number of whole months
• count the number of odd days
• round the number of odd days up or down in line with these rounding rules.

If the date at 2 is in:

• February, round 14 days or less down and 15 days or more up
• any month except February, round 15 days or less down and 16 days or more up.

Then use the number of rounded months at Step 4 and follow the rest of the steps.

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