Legal Article - Employment Law

Statutory Pay Requirements

There are specific circumstances where the law requires the employer to pay at least a minimal amount. These relate to:

I. National Minimum Wage
II. Where an employer is not allowed to unilaterally make deductions from an employee’s pay packet where the Employment Rights Act 1996 applies.
III. For employees of different sex who do similar or equivalent jobs where equal pay applies
IV. For sickness and injury where Statutory Sickness Pay (SSP) applies
V. Where a woman is pregnant and Statutory Maternity Pay (SMP) applies
VI. For lay-offs where guaranteed minimum pay applies

These circumstances are described in detail below.

SSP requirements

Under the Social Security Benefits Up-Rating Order 2011 and associated Regulations, an employer is obliged to pay an employee off work due to sickness or injury (however caused) a minimum payment.

This varies at the discretion of the Secretary of State but from April 2011 it is £81.60. Employers are able to reclaim SSP from the Government in any month in which its SSP payments exceed 13% of their national insurance liability for the month. 

 Any SSP paid out which exceeds that figure is recoverable in full.

SSP must be paid to employees who are incapable of carrying out their contractual duties due to physical or mental illness or disablement. The employer can, however, withhold payment if they have reason to believe that the employee was not ill, or the employee failed to notify the employer of their absence in accordance with the employer’s rules, contained in the employee handbook. If withheld the employer must give the employee, if requested, a written statement on why liability is not accepted.

Case Study:

For an employee to be entitled to SSP the employee must be ill or injured for at least four consecutive calendar days, called a period of incapacity for work (PIW), and been absent for at least 3 qualifying unpaid days, unless the period of incapacity is linked.

Qualifying days are agreed between the employer and the employee and are normally days on which the employee is required to be at work, although this can also include bank holidays. PIWs are linked to form just one period if there is not more than 56 calendar days between them. SSP is only paid in respect of qualifying days.

For example an employee works Mondays to Fridays and these are all qualifying days. They are off work for illness from Thursday to the following Tuesday (i.e. returns to work on Wednesday). Thursday, Friday, Saturday and Sunday are the PIW.

Thursday, Friday, Monday are the qualifying days. The employee is entitled to be paid SSP for Tuesday only.

Once the above rules apply the employer must pay SSP in each PIW for a maximum of 28 weeks or until the employee returns to work, whichever is the soonest, unless any of the following apply:

• The employment is terminated, unless this is to avoid paying SSP
• The employee is detained in legal custody
• The employee’s linked PIW reaches three years
• The employee is pregnant and receiving Statutory Maternity Pay, or is incapable of work because of pregnancy or childbirth on any day which falls on or after the beginning of the sixth week before the expected week of confinement.

The following employees are excluded from SSP.

a) The employee is over the age of 65 or under the age of 16

b) The employee is engaged on a fixed-term contract of three calendar months or less and has not been employed for longer than 13 weeks (Note: two separate contracts separated by no more than 8 weeks are counted together to determine whether or not the employment has lasted, or is likely to last, for more than 13 weeks)

c) The employee’s average weekly earnings are less than the lower limit for National Insurance purposes - £102 per week from April 2011.

d) In the period of 57 days immediately before the first day of incapacity the employee was entitled to (or would have been entitled had he or she fulfilled the National Insurance contributions conditions) and claimed a national insurance sickness or invalidity benefit or maternity benefit. In such cases the employee will be given a “linking letter” by the Department of Social Security to pass on to the employer

e) A new employee has done no work at all under the contract, unless he or she was previously employed by the same employer and the two contracts are separated by no more than eight weeks

f) There is a stoppage of work due to a trade dispute at the employee’s place of employment, unless the employee can show that he or she did not have a direct interest in the dispute

g) The employee has provided an SSP leaver’s statement, which shows that 28 weeks’ SSP has already been due from the former employer, and there is a gap of 56 days or less since the last day of SSP shown on the SSP leaver’s statement

h) The employee is or has been pregnant and is within the disqualifying period

i) The employee is abroad in a non-EEA country; or

j) The employee is detained in legal custody or is serving a period of imprisonment.

SSP is treated as earnings so tax and NI must be deducted. Employers must keep the following records for 3 years:

a) The dates of each reported period of incapacity
b) Details of agreed qualifying days
c) Details of SSP paid to each employee, broken down into weekly, monthly and yearly figures
d) Dates when SSP was not paid, together with the reasons
e) Leaver’s statements given to the employer by employees who were not excluded from SSP; and
f) Copies of any leaver’s statements issued.

SMP Requirements Qualifications

A women who is pregnant qualifies for SMP when she

• Has been continuously employed for at least 26 weeks (irrespective of the number of hours worked) ending with the 15th week before the expected week of confinement (EWC). This 15th week is known as the Qualifying Week (QW).

• Has average weekly earnings in the eight weeks up to and including the QW of not less than the lower earnings limit for the payment of National Insurance contributions (from 6 April 2011 £102 per week)

• Is still pregnant at the 11th week before the EWC, or has already been confined

• Has stopped work because of her pregnancy or confinement

• Has provided her employer with notice of her maternity absence, in writing if the employer requests it. The notice must be given at least 21 days before the absence is due to start or as soon as is reasonably practicable

• Has provided her employer with evidence of the date of her EWC (normally on form Mat B1).

An employer can recover some or all of the SMP contributions they pay depending on the amount of National Insurance Contributions they make a year. If an employers pay £45,000 in National Insurance Contributions or less during the tax year then they can claim 100% of the SMP back, if they pay more than £45,000 they can recover 92%.

Published: 25 May 2011


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