Company Sick Pay UK: Should You Offer More Than SSP?

Statutory Sick Pay (SSP) is the legal minimum employers must pay to eligible employees who are off sick. But at just £116.75 per week (2025/26 rate), it's barely enough to cover basic expenses. Many employers choose to offer company sick pay (also called occupational or contractual sick pay) that goes above and beyond SSP. This guide explores whether it's worth it and how to design a scheme that works for your business.

SSP: a quick recap

Before considering enhanced sick pay, it's worth understanding the SSP baseline:

• Paid at £116.75 per week (2025/26 tax year).
• Payable from the 4th qualifying day of sickness (the first 3 days are "waiting days" with no pay).
• Lasts for a maximum of 28 weeks.
• Employee must earn at least the Lower Earnings Limit (£123/week) to qualify.
• Employer can require a fit note from day 8 of absence.

For most employees, SSP alone represents a significant pay cut. A worker earning £30,000 would see their weekly income drop from roughly £577 to £116.75 — an 80% reduction.

Why offer more than SSP?

1. Recruitment and retention

Enhanced sick pay is one of the most valued employee benefits, particularly among experienced candidates. In a competitive job market, offering company sick pay can be a deciding factor. Candidates increasingly check benefit packages before accepting offers, and a strong sick pay policy signals that the employer cares about employee wellbeing.

2. Reduced presenteeism

When employees can't afford to be off sick, they come to work ill. Presenteeism costs UK businesses an estimated £29 billion per year (CIPD). Sick employees are less productive, make more mistakes, and risk spreading illness to colleagues. A company sick pay scheme gives employees the financial security to recover properly at home.

3. Employee wellbeing and morale

Employees who know they won't face financial hardship if they fall ill report higher job satisfaction and loyalty. Company sick pay is a tangible demonstration that the business values its people.

4. Faster return to work

Employees who can afford to rest and recover properly tend to return to work sooner and in better health than those who either struggle through or delay returning due to anxiety about their finances.

Common company sick pay schemes

There is no single standard for company sick pay. Schemes vary widely, but the most common structures are:

Tiered by duration

The most popular approach is to offer full pay for an initial period, then reduce to half pay, and finally revert to SSP:

• Full pay for the first 4-8 weeks of sickness.
• Half pay for the next 4-8 weeks.
• SSP only after the enhanced pay period ends.

Tiered by length of service

Many employers increase sick pay entitlement as employees gain service. For example:

Designing your scheme

Waiting days

SSP has 3 waiting days. You can choose to pay company sick pay from day 1 (removing the waiting days), or apply the same 3-day waiting period. Paying from day 1 is more generous but removes a natural deterrent against short absences.

Qualifying service

Many employers require employees to complete a probationary period (typically 3-6 months) before they qualify for company sick pay. During probation, the employee receives SSP only.

Evidence requirements

Define when you need medical evidence. Common approaches include self-certification for the first 7 days and a fit note (from a GP or other qualified professional) from day 8 onwards. Some employers require evidence earlier for company sick pay than for SSP.

Conditions covered

Consider whether your scheme covers all conditions equally. Some employers exclude cosmetic surgery or injuries sustained through dangerous hobbies. Be cautious — excluding mental health conditions could be discriminatory.

Cost considerations for SMBs

Company sick pay is a genuine cost that small businesses need to budget for. The CIPD reports average absence rates of 7.8 days per employee per year. For a team of 20, offering full pay for sickness could cost significantly more than SSP alone.

Practical tips to manage costs:

• Start with a modest scheme and increase entitlements over time as the business grows.
• Use waiting days to reduce the cost of short-term absences.
• Invest in occupational health and early intervention to reduce long-term absence.
• Track absence patterns to identify and address underlying issues.

Interaction with SSP

Company sick pay can offset SSP — meaning you pay company sick pay instead of (not on top of) SSP. So if you pay full salary during sickness, that amount includes SSP. You don't pay full salary plus £116.75 on top. Your policy should state clearly that company sick pay is "inclusive of SSP."

Tax implications

Company sick pay is treated as normal earnings. It is subject to income tax and National Insurance through PAYE, just like regular salary. This applies to both the employer and employee. There is no special tax relief for offering enhanced sick pay.

Long-term sickness and capability

When an employee exhausts their company sick pay entitlement and remains unable to work, employers need to consider the next steps carefully. This may involve an occupational health referral, reasonable adjustments, a phased return to work, or ultimately a capability process. Always take legal advice before dismissing a long-term sick employee — disability discrimination claims are a significant risk.

How Leavely tracks different sick pay tiers

Leavely makes managing company sick pay straightforward, even with tiered entitlements:

• Custom leave policies — set up separate sick pay tiers (full pay, half pay, SSP) and define entitlements by service length.
• Automatic tracking — Leavely tracks how many sick days each employee has used and which tier they are in.
• Manager visibility — managers see real-time absence data and receive alerts when employees approach policy thresholds.
• Absence patterns — spot trends with the team absence calendar and dashboard analytics.
• Audit trail — every sick leave request, approval, and note is logged for compliance.