Statutory Sick Pay and Employee Leave Basics

The first time an employee phones in sick, many small employers realise they are not sure what they owe. Sick pay and leave are among the most common payroll questions, and getting them wrong can mean underpaying staff or paying more than you needed to. This guide covers the basics of Statutory Sick Pay and employee leave, and where to check the current figures.

Key takeaways

• Statutory Sick Pay is a legal minimum for eligible employees, paid through payroll.
• Rates, waiting rules and eligibility change, so always check GOV.UK for the current position.
• Workers also have statutory holiday entitlement and, in some cases, family-related leave.
• Keep clear records of absence, notification and pay calculations.
• A written policy avoids confusion and disputes.

What Statutory Sick Pay is

Statutory Sick Pay is the minimum sick pay that employers must pay to employees who are off work because of illness and who meet the conditions. It is paid at a weekly rate set by the government, for a limited period, and only to those who qualify. Eligibility depends on factors such as employee status and earnings, and the rules have changed in recent years. The current details are on GOV.UK's Statutory Sick Pay page, and the employer guidance is on GOV.UK's employer sick pay page. Please check both before you work out any payment.

How SSP is handled in payroll

SSP is treated as pay. It goes through your payroll, is taxed through PAYE, and is reported to HMRC in the normal way. That means you need to record the start and end of each period of sickness, calculate the entitlement and make sure payslips show it. Good payroll software does much of the arithmetic, but it relies on you entering the absence dates correctly. Our guide to the true cost of an employee explains how sick pay fits into the wider cost of employing someone.

Evidence and notification

Employees normally need to tell you promptly that they are sick, and for longer absences you may ask for a fit note. You can set reasonable notification rules in your policy, so long as they are clear and applied fairly. Keep a simple log of who was off, when, and whether you paid statutory or contractual sick pay. If a dispute ever arises, this record is invaluable.

Statutory versus contractual sick pay

Holiday and other leave

Besides sickness, employees and workers have statutory holiday entitlement, which you must provide as a minimum. The rules on how it accrues, and how it applies to part-time and irregular-hours workers, can be involved, so use the GOV.UK holiday entitlement guidance to check. Family-related leave and pay, such as maternity, paternity and adoption leave, also have their own rules and eligibility tests. These are statutory rights, so it pays to understand them before an employee asks.

Worked example (illustrative)

"Nadia", an illustrative example, runs a small cleaning company with three employees. One of them, "Tom", also illustrative, is off for a week with flu. Nadia checks GOV.UK to confirm whether Tom is eligible for SSP and the current weekly rate, records the dates in her payroll software, and Tom's payslip shows the sick pay. She notes the absence in her log and files the fit note if one was needed.

Because Nadia has a written sickness policy, Tom knew whom to call and what to expect. No figures are used here, because they change, so check the current rate rather than relying on any quoted number.

Setting up a simple policy

A one-page sickness and leave policy is a good investment. Cover who to notify and by when, what evidence you require, what pay applies, how holiday is booked and how absence is recorded. A policy does not replace statutory rights, but it makes expectations clear for everyone. If you are about to hire your first employee, our first employee payroll setup guide is a good companion.

Long-term absence and returning to work

SSP is paid for a limited period, so longer absences raise further questions. You may need to consider whether contractual pay continues, whether the employee needs adjustments to return to work, and whether other support is available to them. Keep communication regular and respectful, and keep notes of conversations. Because disability and long-term health issues can bring additional legal protections, take advice early if an absence looks like it will be extended.

Part-time, casual and irregular workers

Not every worker is on a fixed weekly pattern. For part-time, zero-hours and casual workers, calculating holiday and checking sick pay eligibility can be trickier, because earnings and hours vary. Payroll software can calculate holiday accrual for irregular hours, but you must configure it correctly and keep the hours data accurate. If you employ people on varied patterns, it is worth getting your set-up checked once, so errors do not repeat every pay run.

Our employee true cost guide helps you budget for these entitlements before they arise.

Costs and cash flow for the employer

Sick pay and holiday are real costs, and a small business feels them. When someone is off, you may be paying them and also covering their work through overtime or temporary help. Some employers can recover part of statutory payments under HMRC rules, but the conditions have changed over time, so check the current position before assuming any recovery. It makes sense to include a margin for absence when you set prices and budget payroll, rather than treating it as an unexpected expense.

Record keeping and payslips

Employees are entitled to a payslip that shows their pay and deductions, and sick pay should be visible on it. Payroll records must be kept for the period required by law, so check how long to keep them. Accurate absence and holiday records protect you if there is ever a dispute about what an employee was owed. Our guide to payslips and RTI reporting explains how pay is reported to HMRC each time you run payroll.

Leaving a business: holiday and final pay

When an employee leaves, any accrued but untaken statutory holiday normally needs to be paid in their final pay, and any sick pay due must be settled. Work this out before the last payroll run so the figures are right first time. Check the contract too: it may give more than the statutory minimum. Having the rules and the paperwork in order avoids awkward corrections after someone has gone.

Many small employers find that outsourcing payroll removes much of this worry, because the provider tracks changes to rates and rules for them. Whichever route you take, remember that the legal responsibility stays with the employer.

Common mistakes

• Using out-of-date figures. The weekly rate and rules change, so check GOV.UK each time.
• Not recording absence. Missing records lead to payroll errors.
• Assuming everyone qualifies. Eligibility has conditions.
• Treating holiday as optional. Statutory holiday is a legal minimum.
• No written policy. It invites confusion and disputes.

Payroll is easier when someone else keeps the rules current. Our payroll service handles sick pay, holiday pay and reporting for you, and you can get in touch to discuss what your business needs.