Sick Pay & Universal Credit Guide for Employers

This article explains how Statutory Sick Pay interacts with Universal Credit from an employer’s perspective. It provides HR professionals and business owners with a clear understanding of how SSP affects UC entitlement, what employers must report through payroll and the points where SSP ending can impact an employee’s income. The focus is on compliance, accurate reporting and lawful communication so employers manage sickness absence effectively without giving welfare advice.

What this article is about: It sets out how SSP works, how Universal Credit is assessed, what employers must do when SSP is paid or ends and how HR teams should manage long-term sickness cases where employees rely on UC for income. It gives structured guidance on eligibility, payroll reporting, capability processes and risk management while keeping within the legal boundaries of employer responsibilities.

Section A: Understanding Sick Pay and Universal Credit

This section explains how Statutory Sick Pay and Universal Credit operate in practice, how the two systems interact and what employers need to understand when managing sickness absence. The aim is to give HR professionals a clear view of how employee income is assessed during periods of illness and how payroll reporting influences benefit entitlement. Employers do not provide Universal Credit and have no legal duty to advise on benefits, but accurate handling of SSP is central to reducing disputes and ensuring compliance.

1. What Statutory Sick Pay covers

Statutory Sick Pay is the minimum legal payment employers must provide to eligible employees who are off work due to sickness. SSP is paid at a fixed weekly rate, set by the government and reviewed periodically, and is payable for each qualifying day of sickness after the initial waiting period. It applies from the fourth qualifying day of sickness, not the fourth calendar day. The employee must earn at least the lower earnings limit and must have notified the employer of their sickness absence within the required timescale. SSP runs for up to 28 weeks and is paid through the employer’s payroll in the same way as normal wages.

SSP differs from contractual sick pay. Contractual schemes may offer higher payments or longer support, but employers are only legally required to provide SSP. Where a contractual scheme is in place, the employer must ensure that the rules are followed consistently and that no employee receives less than the statutory minimum. All SSP payments must be reported via RTI, which feeds into the Universal Credit calculation if the employee is a UC claimant. Employers can no longer reclaim SSP from HMRC under the former Percentage Threshold Scheme, so SSP costs must be fully funded by the employer.

2. What Universal Credit provides during sickness

Universal Credit is the main means-tested benefit for people of working age. It supports individuals with low income, those out of work or those whose earnings drop during periods of sickness. UC is assessed monthly for each claimant’s assessment period and reflects the claimant’s income after tax, NI and applicable deductions. For employees who are unwell, UC can provide additional support where SSP does not cover their financial needs.

When an employee is off sick, their UC award depends on their circumstances. Universal Credit includes elements based on housing, children and disability. If the employee cannot work because of a health condition, they may be referred for a Work Capability Assessment if they supply continuous fit notes to the DWP. The assessment can place the claimant in the limited capability for work group or the limited capability for work-related activity group. Being found to have limited capability for work-related activity can increase the award through the LCWRA element, while a limited capability for work decision usually only increases UC in certain transitional cases. A work allowance, which allows part of a claimant’s earnings to be ignored, is only available where the claimant (or their partner) has responsibility for a child or is assessed as having limited capability for work.

3. How SSP interacts with Universal Credit

SSP counts as earnings for Universal Credit, which means it reduces UC through the standard taper. UC is calculated for each monthly assessment period using the employer’s RTI submissions, so payroll accuracy directly affects an employee’s award. The timing of SSP payments within an assessment period can affect the UC figure for that period. If SSP is underreported or misreported, the employee’s UC payment may be wrong and the employer could be asked to correct the payroll record through an amended Full Payment Submission.

Employees can claim UC while receiving SSP if their income is low enough. UC continues throughout the sickness period, but the amount may change each month in line with earnings and other circumstances. Once SSP ends after 28 weeks, the employee stops being considered as having earnings from that employment unless they receive contractual sick pay or other payments. At that point, UC may increase because the employee’s assessed earnings drop. Employers do not notify the DWP directly when SSP ends; instead they must issue the SSP1 form to the employee so the DWP can reassess entitlement.

4. Employer reporting duties

Employer reporting responsibilities relate to payroll accuracy. All SSP payments must be reported through RTI on or before the payment date. RTI submissions inform DWP of the employee’s earnings, which are then factored into the UC calculation for the relevant assessment period. Mistakes in RTI can lead to UC underpayments, overpayments or disputes. Employers are not responsible for explaining UC calculations to employees, but they must correct any payroll errors without delay by submitting updated Full Payment Submissions and, where relevant, Employer Payment Summaries.

If SSP ends, the employer must issue the SSP1 form, which allows the employee to claim UC or other benefits without delay or to have their existing award reviewed. The form confirms that SSP is not payable, which DWP requires for ongoing assessment. HR teams must also ensure that sickness records, fit notes and SSP calculations are accurate and held in accordance with payroll and data protection requirements. Clear internal processes between HR and payroll help ensure that SSP is triggered correctly, reported accurately and brought to an end on the correct date.

Section B: Eligibility Rules for SSP and Universal Credit

This section explains the eligibility criteria for Statutory Sick Pay and Universal Credit, highlighting the different tests applied by employers and the DWP. Understanding these rules helps employers manage sickness absence accurately and advise employees on the information they need to provide, without offering benefits guidance. The section also outlines situations where employees may receive both payments and the categories of workers excluded from SSP.

1. Who qualifies for SSP

Statutory Sick Pay applies to employees who meet specific legal requirements. First, the employee must be classed as an employee for tax and employment law purposes. SSP does not depend on contract type, meaning full-time, part-time and zero-hours staff can all qualify. Second, the employee must earn at least the lower earnings limit averaged over the relevant reference period. If their earnings fluctuate, employers must use the correct reference weeks to calculate average weekly earnings.

The employee must also have been off sick for at least four consecutive qualifying days. Employers can require evidence of sickness, such as a fit note, after seven days. Notification rules must be reasonable and applied consistently. Failing to meet notification deadlines does not automatically prevent SSP if the rules are unreasonable or unclear. If an employee meets the criteria, SSP must be paid from day four of absence, and RTI submissions must accurately reflect SSP payments.

If an employee is not eligible for SSP, the employer must issue an SSP1 form within seven days of determining ineligibility or within seven days of a request. This allows the employee to access Universal Credit or other benefits without delay.

2. Who qualifies for Universal Credit during sickness

Universal Credit is a means-tested benefit, so entitlement depends on overall household income, savings and personal circumstances. An employee who receives SSP may still qualify for UC if their income is low enough. Unlike SSP, UC does not depend on employment status. Employees, agency workers, zero-hours staff and people out of work can all claim UC.

Savings above £16,000 prevent UC entitlement. Savings between £6,000 and £16,000 are treated as assumed monthly income. Partner income also counts, meaning an employee in a couple may not qualify even with low earnings. UC may increase if an employee is assessed as having limited capability for work or limited capability for work-related activity, following a Work Capability Assessment. A WCA referral only takes place if the claimant provides continuous fit notes covering their period of sickness.

A claimant may have a work allowance if they have responsibility for a child or have limited capability for work. This allows part of their earnings to be ignored in the UC calculation. Employees who do not meet these criteria do not benefit from a work allowance and therefore experience a higher reduction in UC when SSP is paid.

3. Employees who are excluded from SSP

Some workers do not qualify for SSP, making Universal Credit particularly relevant. Excluded categories include employees who earn below the lower earnings limit, employees with insufficient earnings records in the reference period, and certain agency workers depending on their contract terms. Employees who have already exhausted 28 weeks of SSP are also excluded. Employees who recently received certain social security benefits may also be excluded if the entitlement period overlaps with SSP.

Where an employee is excluded from SSP, the employer must issue an SSP1 form promptly to confirm the reason for non-eligibility. This is required for the employee to claim UC or other sickness-related benefits without delay.

4. When employees can receive both

Employees may receive both SSP and Universal Credit if their income is low enough. UC adjusts automatically each assessment period through the earnings taper. SSP is treated as earnings, reducing UC, but does not prevent entitlement. Once SSP ends after 28 weeks, UC may increase because the earnings recorded via RTI reduce.

Some employees benefit from a work allowance, which permits part of their income to be disregarded. This applies to employees with children or those who have limited capability for work. Employers do not calculate UC entitlement, but understanding the effect of earnings reporting helps HR teams communicate clearly without giving regulated welfare advice.

Section B Summary

Section B sets out the eligibility rules for SSP and Universal Credit and explains when employees may qualify for both. It highlights the importance of correct SSP assessment, timely issue of the SSP1 form and clear communication with employees about what employers can and cannot advise. Employers must understand the legal distinctions between SSP and UC, as well as the impact of payroll reporting on benefit entitlement.

Section C: Managing Employees Moving From SSP to Universal Credit

This section explains the practical steps employers must take when an employee reaches the end of their SSP entitlement and begins relying more heavily on Universal Credit. Although employers do not administer UC, their actions at the end of SSP influence the employee’s ability to access benefits without interruption. HR teams must also manage the employment relationship during long-term sickness, ensuring compliance with equality law and the employer’s own attendance management policies.

1. When SSP ends after 28 weeks

Statutory Sick Pay ends after 28 weeks. Employers must monitor SSP entitlement to avoid accidental overpayments or underpayments. When entitlement is nearing its end, employers should notify the employee in writing and prepare the SSP1 form. The form confirms that SSP is no longer payable and is required for the employee to access alternative support through Universal Credit or other benefits.

The employer must issue the SSP1 form on or before the beginning of the 23rd week of sickness if it is clear the employee will reach the full 28-week entitlement. If entitlement cannot be confirmed earlier, the form must be issued no later than the last day SSP is paid. If an employee is not eligible for SSP at all, the SSP1 must be issued within seven days of the decision or seven days of an employee request. Employers do not need to inform the DWP directly; their responsibility is limited to calculating SSP correctly, issuing the SSP1 form on time and maintaining accurate payroll records.

2. Fit notes and work capability

Once SSP ends, employees may still need to provide evidence of their medical condition for Universal Credit. UC claimants must usually submit ongoing fit notes to the DWP until they undergo a Work Capability Assessment. The assessment determines whether the claimant meets the criteria for either limited capability for work or limited capability for work-related activity. Being placed in the LCWRA group increases UC through the LCWRA element, while being placed in the LCW group only affects UC amounts in certain transitional situations.

Employers may request updated medical evidence as part of their own sickness absence review processes, but employer requirements are distinct from DWP requirements. HR teams must ensure that any requests for medical information comply with data protection obligations and are proportionate to managing the employee’s absence. Occupational health involvement is recommended for complex or long-term conditions to ensure decisions are evidence-based.

3. Employer responsibilities when SSP ends

Once SSP has been exhausted, employers have no further statutory sick pay obligations, but they must still follow internal sickness and capability procedures. Employers should ensure the employee receives the SSP1 form promptly and understands it must be submitted to the DWP. Employers should continue to record sickness absence and manage the employment relationship in accordance with internal policies and the Equality Act 2010.

Where an employee is unlikely to return to work soon, HR teams may begin formal capability reviews. This process must be handled fairly in accordance with section 98 of the Employment Rights Act 1996, taking into account medical prognosis, consultation, adjustments and alternative roles. Ending SSP does not justify a rushed capability process. A fair, documented and reasonable approach is required with evidence-backed decision making. Employers must also ensure that payroll systems stop SSP correctly and that RTI submissions accurately reflect post-SSP payments, if any.

4. HR risks when employees rely on UC

Employees who rely on Universal Credit during sickness are often financially vulnerable, which increases the risk of disputes. Employers must ensure consistent handling of absence cases and avoid assumptions about an employee’s financial situation. Mistakes in SSP calculation or delayed provision of the SSP1 form can have significant consequences for UC payments, exposing the employer to grievances or reputational issues.

There are disability discrimination risks where the employee has a long-term condition that may amount to a disability under the Equality Act 2010. Employers must consider reasonable adjustments and ensure that attendance management policies, including trigger points, do not disadvantage disabled employees. Accurate payroll reporting and clear documentation help reduce the risk of complaints and disputes.

Section C Summary

Section C outlines the responsibilities employers hold when SSP entitlement ends and the employee turns to Universal Credit for continued support. Employers must issue the SSP1 form on time, maintain accurate records and follow fair and compliant sickness management procedures. Although they do not administer UC, employers play a crucial role in ensuring employees can transition smoothly between statutory systems while maintaining fair employment practices.

Section D: Practical HR Guidance for Employers

This section provides practical guidance for HR professionals on managing sickness absence where employees are receiving Statutory Sick Pay and Universal Credit. The aim is to support compliant procedures without stepping into benefits advice. Employers must focus on accurate reporting, consistent communication and fair handling of long-term sickness while remaining aware of the legal boundaries that prevent them from giving welfare advice.

1. Communicating with employees on SSP and UC

Employers should keep communication clear and factual. HR teams can outline the employer’s responsibilities, confirm SSP entitlements and explain when SSP will end, but should avoid providing advice on Universal Credit calculations or eligibility. Instead, employees can be signposted to GOV.UK for UC information.

Communication should be regular and proportionate. For employees with long-term sickness, periodic check-ins help maintain the employment relationship and reduce misunderstandings. When discussing SSP and UC, HR should explain the employer’s role in providing payroll information through RTI and issuing the SSP1 form. It is appropriate to clarify that UC will use payroll data from HMRC to assess entitlement, but the employer must not attempt to interpret or advise on UC rules, calculations or work-related requirements, as these fall within regulated welfare advice.

2. Managing long-term sickness absence

Where an employee remains unwell for an extended period, HR teams must apply internal sickness policies consistently and in line with statutory rights. The Equality Act 2010 requires employers to consider whether the employee’s condition amounts to a disability. A disability under the Act requires a physical or mental impairment with a substantial and long-term adverse effect on day-to-day activities. If so, reasonable adjustments must be explored to support the employee’s return to work or ongoing employment.

Managing long-term absence requires careful record keeping, up-to-date medical evidence and well-documented review meetings. Employers must avoid assumptions about prognosis and rely on occupational health assessments where appropriate. Capability procedures may be required where there is no likely return to work, but these processes must be fair, consultative and based on medical evidence to meet the reasonableness test under section 98 of the Employment Rights Act 1996.

3. Payroll and reporting compliance

Accurate payroll processing is central to correct UC calculations. All SSP payments must be reported through RTI on or before the date of payment, using the correct payment type and period. Employers must ensure payroll systems correctly move employees from normal pay to SSP and then to no-pay status once entitlement ends.

Any correction to payroll must be submitted promptly via an amended Full Payment Submission and, where appropriate, Employer Payment Summary. This reduces the likelihood of UC overpayments or underpayments. HR teams should work closely with payroll providers to ensure sickness absence records and pay data are aligned. Good record keeping supports defensible decision making and helps prevent disputes.

4. Supporting employees without creating employer liability

Employers do not have a legal responsibility to explain Universal Credit, and they should avoid providing regulated welfare advice. HR teams should give factual information only, such as confirming pay dates, income figures, SSP entitlement periods and the issue of the SSP1 form. When employees ask about welfare benefits, they must be directed to official resources so the employer avoids liability for misadvice.

Support can be practical. Providing timely payslips, responding promptly to payroll queries and maintaining clear communication reduces employee uncertainty. This allows employers to support staff appropriately while protecting themselves from liability and ensuring compliance with employment law and data protection requirements.

Section D Summary

Section D outlines the practical steps HR teams can take to manage sickness absence where employees receive SSP and may rely on Universal Credit. Employers must communicate clearly, apply long-term absence procedures fairly and maintain accurate payroll reporting. By keeping within the boundaries of factual information and avoiding benefits advice, HR professionals can support employees while maintaining compliance.

FAQs

This FAQ section addresses the questions employers and HR teams most commonly raise when dealing with sickness absence where employees rely on Statutory Sick Pay and Universal Credit. The answers focus on employer responsibilities, payroll implications and the boundaries of lawful communication, ensuring HR teams stay compliant.

Can employees receive SSP and Universal Credit at the same time?

Yes. An employee can receive both SSP and UC if their income is low enough to qualify for UC. SSP counts as earnings for UC purposes and reduces the UC award through the earnings taper in each assessment period. Employers only need to ensure accurate SSP payment and RTI reporting and must avoid advising on how much UC the employee will receive.

Does SSP reduce Universal Credit payments?

Yes. UC is means-tested and SSP is treated as earnings. The UC award decreases as earnings rise. UC calculates this automatically using RTI data from the employer for the relevant assessment period. The employer’s responsibility is to ensure pay information is correct and submitted on or before the payment date.

What should employers do when SSP ends?

Employers must issue the SSP1 form on time, stop SSP in payroll and continue managing the employee’s absence through internal policies. Where it is clear that SSP will run for the full 28 weeks, the SSP1 form must be issued on or before the beginning of the 23rd week. If an employee is never eligible for SSP, the SSP1 must be issued within seven days of the decision or within seven days of a request. The SSP1 enables the employee to claim UC or other support without interruption.

Does long-term sickness affect employment rights?

No statutory rights are lost because of sickness absence. Employees still accrue holiday and retain protection under unfair dismissal and equality law. Long-term health conditions may amount to a disability under the Equality Act 2010, which requires employers to consider reasonable adjustments. Employers must follow a fair, evidence-based capability process before contemplating dismissal.

Do employers have to advise employees on Universal Credit?

No. Employers must avoid giving benefits advice. Their responsibility is limited to accurate payroll reporting, issuing the SSP1 form where required, and signposting employees to official resources such as GOV.UK. HR teams should provide factual pay and employment information only and must not advise on UC entitlement, calculations or work-related requirements.

Conclusion

This article has explained the interaction between Statutory Sick Pay and Universal Credit from an employer’s perspective, focusing on compliance, communication and long-term sickness management. While employers do not administer Universal Credit, their payroll accuracy and adherence to statutory processes influence how employees access financial support during periods of illness.

Employers must ensure that SSP is calculated correctly, entitlement is monitored and the SSP1 form is issued on time. RTI submissions must be accurate because UC relies on this data for each claimant’s assessment period. HR teams should apply sickness and capability procedures consistently, with particular attention to equality law where long-term conditions may amount to a disability. By keeping communication factual and avoiding welfare advice, employers can support employees effectively while protecting themselves from liability. A structured and compliant approach helps reduce disputes and provides clarity for employees navigating SSP and Universal Credit.

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