Sick Pay Guide for Employers

Does your employee earn enough?

What counts as earnings?

You must include all earnings actually paid and subject to Class 1 NICs in the ‘set period’ in the total earnings figure.

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

This does not usually include earnings that attract Class 1A NICs, paid on company benefits or Class 1B NICs, paid on PAYE Settlement Agreements, Working and Child Tax Credit.

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 ‘set period’ are less than the LEL, you must check whether they received any benefits or expenses, which would otherwise have attracted Class 1 NIC liability, within the ‘set 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.

Over/underpaid earnings during the set period

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

So where over or under payments of wages occur within the set 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

If you have paid an employee’s wages earlier or later than the normal pay day at the beginning or end of a set period because of a particular event, such as a 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 set period. For example, a weekly paid employee is taking two weeks paid holiday so you pay them three weeks’ wages on the last pay day before they take their leave. They go sick six weeks after their holiday. The set 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 set period as you had paid their wages for the first two weeks before the beginning of the set period. To give the correct AWE you should divide the total earnings actually paid in the set period by six, as the earnings represent only six weeks' wages.

Multiple or changed pay frequency in the set period

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

Employees with more than one job

Your employee could have more than one job with you or work for you and another employer.

If the employee’s earnings from all their jobs 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 Employer Further Guide to PAYE and NICs.

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
• any payments at the time the PIW begins.

Use the table to work out the AWE.

Earnings do not cover eight weeks

Where the last normal pay day before the PIW has been established but previous pay days 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 ‘set period’.

So if the employee only received three days wages, the set period is three days. To get the average weekly figure divide the three days’ wages by three and multiply by seven.

Where the employee falls sick before they have had their first pay day, 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 £90.00 or more they will qualify.

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

For monthly paid staff, where there is a part month payment in the set period, between the dates at 2 and 1 using the check sheet.

When you get to Step 4 of the monthly check sheet, work out 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 on the checksheet.