Occupational Sick Pay (OSP) UK: Employer Policy Guide (2026)

Occupational sick pay (OSP), often called company sick pay or contractual sick pay, is any sick pay scheme an employer chooses to provide that is more generous than Statutory Sick Pay (SSP). There is no legal requirement to offer occupational sick pay, though once an enhanced scheme is written into an employment contract without reservation, it becomes a contractual right.

Whenever an employee is off sick, SSP remains the legal floor. From 6 April 2026, SSP is payable from day one of a qualifying sickness absence at 80% of average weekly earnings capped at £123.25 per week (for up to 28 weeks), with no Lower Earnings Limit. Occupational sick pay sits on top of that statutory baseline by topping the employee's pay up to 100% (full pay) or 50% (half pay) for a defined number of days or weeks.

Your policy wording should always state explicitly that occupational full pay is 'inclusive of any Statutory Sick Pay due'. Without that phrase, an employee can argue they are entitled to 100% of basic salary plus £123.25/week SSP on top. For half-pay tiers, state clearly whether the employee receives 50% of normal salary plus SSP (capped at 100% of normal pay) or 50% inclusive of SSP (never less than the statutory SSP rate).

When designing an occupational sick pay scheme, the most important decision after the number of paid days is the measurement window. Using a fixed calendar year or leave year creates a cliff-edge: an employee who exhausts their company sick pay in December immediately gets a brand-new full allowance on 1 January during the same illness. Instead, most UK employers measure company sick pay over a rolling 12-month period looking back from each day of absence.

Many organisations also scale company sick pay with length of service, or align with sector frameworks (such as the Burgundy Book for teachers and the Green Book for school support staff). Keep the tiers simple enough that both your payroll provider and the employee can check the remaining balance at a glance.

Include clear conditions for receiving enhanced company sick pay: timely notification on the first day of absence, cooperation with return-to-work conversations, and providing fit notes promptly after 7 calendar days. While you cannot withhold statutory SSP for minor procedural breaches, your policy can state that enhanced occupational top-ups require compliance with the reporting procedure.

When an employee's occupational full-pay or half-pay allowance runs out during a longer illness, sick pay does not automatically drop to zero. Because SSP runs for up to 28 weeks (and any days where SSP was offset inside occupational sick pay count towards those 28 weeks), the employee normally steps down from occupational pay to statutory SSP for the remainder of their 28-week statutory entitlement.

Communicate pay step-downs before the payroll cut-off date so an employee recovering from illness is never surprised by a sudden drop on their payslip. If their sickness absence is approaching the end of the 28-week SSP maximum (or if they do not qualify for SSP), you must send them form SSP1 on or before the beginning of the 23rd week (or within 7 days of SSP ending if it ends unexpectedly) so they can claim Universal Credit or New Style Employment and Support Allowance (ESA).

Throughout any extended absence, apply your policy consistently and check whether the underlying condition amounts to a disability under the Equality Act 2010. Before reducing pay or taking formal capability steps, consider whether reasonable adjustments (such as a phased return or adjusted duties) would enable the employee to return to work.