Understanding Occupational Sick Pay for Employers

Occupational Sick Pay (OSP) is a scheme provided by employers to offer enhanced financial support to employees who are unable to work due to illness. It is an optional benefit that goes beyond the statutory sick pay (SSP) requirements set by UK law. Employers can tailor OSP schemes to align with their organisation’s policies and budget, offering a competitive advantage in attracting and retaining talent.

Unlike SSP, which is capped at a fixed weekly amount for up to 28 weeks, OSP allows employers to provide payments at a higher rate or for a longer duration. The terms of OSP, including eligibility criteria, payment levels and duration, are usually outlined in an employee’s contract or the organisation’s sickness policy.

For employers, offering OSP can help maintain employee morale and reduce financial stress during periods of ill health. However, managing occupational sick pay can often be complicated. It requires careful management to avoid excessive costs or abuse of the system. Employers must ensure clarity in policy wording and fairness in application.

It is also essential to maintain compliance with legal obligations, such as providing reasonable adjustments for eligible employees under the Equality Act 2010. Proper record-keeping and clear communication are key to administering OSP effectively and avoiding disputes.

The following guide for employers looks at the rules on occupational sick pay – including entitlement, rates and duration – and how this differs to statutory sick pay. We also look at what happens when sick pay comes to an end, and how both long-term and short-term sickness absence can be more effectively managed.

 

What is occupational sick pay (OSP)?

 

If an employee is absent from work through illness, they may be eligible for either of the two types of sick pay that may be available: occupational sick pay (OSP), or Statutory sick pay (SSP)

OSP, or contractual sick pay as it is also known, is the pay that an employee will be entitled to receive under their contract of employment during a period of sick leave. This is a contractual right, where an employer can offer more than the statutory minimum under a company sick pay scheme, although this must be incorporated into the employment contract.

Statutory Sick Pay (SSP) is a legal entitlement provided by employers to eligible employees who are unable to work due to illness. It ensures that employees receive some financial support during periods of sickness.

Employees can receive Statutory Sick Pay (SSP) and Occupational Sick Pay (OSP) simultaneously, depending on their employer’s policies. In practice, OSP is usually inclusive of SSP, this being the minimum statutory entitlement for an employee during sick leave.

Employers are not reimbursed by the government for SSP payments, making it their responsibility to cover the cost.

 

What are the rules on OSP?

 

The rules on occupational sick pay will be determined by the terms of your company sick pay scheme. Ordinarily, this will include the following:

 

• The eligibility requirements
• The process for reporting and documenting sickness
• The submission of doctor’s notes
• The rate of any sick pay
• The duration of any sick pay
• The need for any occupational health assessments

 

However, to avoid claims of discrimination, it is essential to treat all employees fairly when creating the rules relating to sick pay. It is therefore advisable to have in place a clear policy, clarifying your employee’s entitlements in relation to both OSP and SSP. It should also include the process for requesting sick pay.

It is also important to ensure that part-time workers are not treated less favourably than comparable full-time workers in terms of calculating the length of service required to qualify for occupational sick pay, the rate of payment, and the length of time the payment is received.

 

Who is entitled to an OSP payment?

 

An employee’s entitlement to occupational sick pay will depend on the rules under the company sick pay scheme. These can vary from firm to firm, and can often be broken down into the following criteria:

 

• The definitions of qualifying workers, where you may operate different schemes for white collar/management grades and manual workers;
• How much service an employee must accrue to become entitled to sick pay, where in many cases this contractual right will only arise following a minimum period of service, for example, after three months probation;
• Any exclusions from the entitlement to sick pay, where some company sick pay schemes will not make payment, for example, following elective surgery or injury sustained while engaged in professional sports.

 

 

When is the entitlement to OSP triggered?

 

Under most company sick pay schemes, the employee will be required to notify an employer of their absence within a required timeframe, usually day one of any sickness, under a self-certification process. That said, an employee is not usually obliged to provide their employer with a statement of their fitness from work, more commonly referred to as a fit note, until after they have been off sick for more than 7 consecutive days.

A fit note is the official document issued by an eligible medical professional to provide evidence about an individual’s fitness for work. It will set out the nature of the illness for which the employee has been absent from work, together with a prognosis period, and whether or not a further assessment will need to be made at the end of this period.

If an employee is off work for just a few short days, during which time they are not required to provide you with proof of their illness, on their return to work you can ask an employee to self-certify that they have been off sick.

An agreement will need to be reached between you and the employee as to how this will be done. You may already have a form that your company or organisation uses for this purpose, or you can ask an employee to explain in writing the details of their absence, either by way of letter or email.

 

How much is occupational sick pay?

 

Occupational sick pay is a matter of contractual terms and conditions, so the rate of occupational sick pay will depend on what has been included in the employee’s contract of employment. As long as OSP matches or exceeds the SSP rates it is up to you, as the employer, to decide the rate at which you will pay for sickness absence.

This means that you can offer to pay an employee more under their contract, but you cannot pay them less than their minimum statutory entitlement. SSP is paid at a rate of £109.40 per week (as of 10 April 2023) up to a maximum of 28 weeks.

Where the employee has a contractual right to enhanced sick pay, the OSP payment should usually be calculated on the basis of the average of the employee’s weekly hours, normally over 12 weeks, rather than their minimum contractual hours.

 

How long do you have to pay occupational sick pay?

 

The duration of any occupational sick pay is also a matter of contract, where an employer will often provide full pay for a set number of weeks or months – once an employee qualifies for OSP – which may then be followed by a period of half pay before going onto unpaid leave.

This can also vary depending on the employee’s length of service. For example, for the first year of service, and following a probationary period of say 3 months, an employee may be entitled to one month’s full pay with one month’s half pay, increasing to 6 months full pay and 6 months’ half pay after 5 years of service.

 

How does occupational sick pay differ to SSP?

 

Occupational sick pay differs to SSP in a number of ways, mainly because OSP is a contractual right arising from the employment contract, while SSP is a basic right that is derived from statute.

This means that OSP is a contractual payment that you choose to pay your employees, providing them with an enhanced entitlement to be paid more than the statutory minimum; whereas SSP is a statutory payment that must be paid, as long as the employee meets the eligibility criteria.

In the absence of any entitlement to occupational sick pay, an employee may be eligible for SSP where they have been absent from work through illness for 4 or more consecutive days, including non-working days such as weekends or bank holidays. To qualify for SSP, an employee must be earning an average of least £123 per week before tax (£125 from 6 April 2025), although this Lower Earnings Limit may be removed under the new Employment Rights Bill.

They must also notify you of their illness within any specified timeframe under the terms of their employment contract, or within 7 days. The entitlement to SSP will only trigger where notice of their sickness is given in accordance with these requirements, although this does not necessarily need to be done by way of any special form. You are also not entitled to withhold SSP if the employee is late in submitting a fit note.

You will only usually need to start paying SSP from the fourth qualifying day, the first three being unpaid (known as the ‘waiting period’), unless the employee has been off sick and getting SSP within the last 8 weeks. If your employee has had regular periods of sickness, these may count as linked, continuing as one period of sickness.

 

What happens when sick pay comes to an end?

 

An employee will no longer be entitled to SSP after 28 weeks payments in a row, or for periods of sickness that are 8 weeks or less apart and which are more than 28 weeks in total. If the period of incapacity continues after the 28-week cut-off point, as the employer you will need to complete Form SSP1 to ensure that the employee is able to make a claim for social security benefits.

The completed form will need to be given directly to the employee within 7 days of the SSP ending, or on or before the beginning of the 23rd week. If an employee doesn’t qualify for sick pay, you will be required to send the SSP1 form within 7 days of the employee going on sick leave.

When occupational sick pay comes to an end, in the context of long-term sick leave, an employee may have unused annual leave entitlement that can be taken as paid leave. Leave will still accrue during any period of sickness absence.

Where the employee is no longer eligible for any form of paid leave, they may instead be eligible to claim benefits from the government, such as Universal Credit or Employment and Support Allowance (ESA).

That said, is incumbent on you to positively support an employee’s return to work, especially where their GP has indicated that the individual “may be fit for work”, subject to certain changes. These could include, for example, a phased return to work, amended duties, altered hours or workplace adaptations.

Further, where an employee’s delay in returning to work is related to a disability, by law you are required to make reasonable adjustments at work to ensure that they are not substantially disadvantaged when carrying out their job role.

 

How can you minimise the cost of sick pay?

 

Where you have the necessary resources, it is always advisable to ask an employee on long-term sick leave to undergo an occupational health assessment. Any written sick pay policy that you have in place may even require an assessment to be carried out after a certain period off sick.

In addition to any suggestions made by the employee’s GP, an occupational health assessment can help to determine the employee’s ability to return to work, specifically in the context of their job role and working environment.

Occupational health assessments can help you to understand what an employee needs to aid their recovery and return to work, as well as how best to avoid problems that could cause further health or absence issues. An assessment can also be used to identify what reasonable adjustments can be made within the workplace for anyone with a long-term physical or mental health condition.

For short-term absences, the best way to reduce the impact of sick pay is through absence management. This means taking steps to actively manage sickness levels, such as through the use of return to work interviews. By interviewing an employee immediately on their return to work, this can be an effective way of establishing the reason for an employee’s absence and any identifying triggers. It can also act as a deterrent against unauthorised absences.

 

Need assistance?

 

DavidsonMorris are experienced employment law and HR specialists offering guidance and support to employers in relation to employee entitlements in areas such as sick pay. If you have a specific query relating to occupational sick pay, contact us for advice.

 

Occupational Sick Pay FAQs

 

What is occupational sick pay?

Occupational sick pay (OSP) is a benefit provided by employers that offers financial support to employees who are off work due to illness, in addition to statutory sick pay (SSP).

 

Is occupational sick pay a legal requirement?

No, providing OSP is not mandatory. Employers can choose whether to offer it and determine the terms of the scheme.

 

How is occupational sick pay different from statutory sick pay?

Statutory sick pay is a legal minimum set by the government, whereas OSP is an enhanced benefit offered by employers, often providing higher payments or covering a longer period.

 

Who is eligible for occupational sick pay?

Eligibility for OSP depends on the terms outlined in an employee’s contract or the company’s sickness policy. Employers may set specific criteria for entitlement.

 

How is occupational sick pay calculated?

The amount and duration of OSP vary by employer. It may be based on a percentage of the employee’s regular pay and is often outlined in the employment contract.

 

Can employers refuse to pay occupational sick pay?

Employers are not obliged to provide OSP unless it is specified in the employee’s contract or the organisation’s policies.

 

Does OSP affect statutory sick pay entitlement?

No, OSP is paid in addition to or instead of SSP, depending on the terms of the scheme. Employers remain responsible for meeting SSP obligations.

 

Can employees claim occupational sick pay if they are on long-term sick leave?

Long-term entitlement depends on the employer’s policy. Some schemes may offer reduced pay or time-limited benefits for extended absences.

 

What happens if there is a dispute over occupational sick pay?

Employees can raise concerns through the company’s grievance procedure. Employers should ensure policies are clearly communicated to minimise misunderstandings.

 

Glossary

 

Term	Definition
Occupational Sick Pay (OSP)	A benefit provided by employers to supplement or replace statutory sick pay during an employee’s illness.
Statutory Sick Pay (SSP)	The minimum amount employers are legally required to pay eligible employees who are off work due to illness, currently capped at £109.40 per week.
Sickness Policy	An organisation’s guidelines outlining employee entitlements and procedures for managing sick leave and pay.
Eligibility Criteria	Conditions set by the employer that an employee must meet to qualify for occupational sick pay, such as length of service.
Reasonable Adjustments	Changes made by employers to support employees with disabilities or long-term health conditions under the Equality Act 2010.
Short-Term Sick Leave	Absences from work due to illness lasting a few days or weeks, often covered by OSP or SSP.
Long-Term Sick Leave	Extended periods of absence due to illness, which may be subject to different entitlements under OSP policies.
Fit Note	A medical statement issued by a doctor confirming an employee’s fitness to work or need for time off due to illness.
Discretionary Benefit	A non-mandatory benefit provided by employers, such as OSP, which is determined by the organisation’s policy or contracts.
Contractual Entitlement	Rights or benefits specified in an employee’s contract, including terms related to sick pay.
Grievance Procedure	A formal process for employees to raise concerns or disputes, including issues related to sick pay entitlements.
Equality Act 2010	UK legislation protecting employees from discrimination, requiring employers to make reasonable adjustments for disabled individuals.
Payroll Deduction	Adjustments made to an employee’s pay to account for sick leave, where applicable under company policy.