Introduction to this document

Sick pay clause

You’re obliged to include any provisions for sick pay as part of the written statement of employment particulars. However, it’s entirely up to you whether you only pay statutory sick pay (SSP), whether you operate a discretionary sick pay scheme or whether you want to tie yourself in to a contractual sick pay scheme.

SSP complications

If all you pay during sickness absence is SSP, your sick pay clause simply needs to make reference to this. It’s best not to repeat the full details of the SSP scheme in the contract because the rules do change from time to time and the amount of SSP is increased on 6 April each year. You can’t pay nothing at all during sickness absence because it’s not possible to contract out of your obligation to pay SSP.

A discretionary scheme

Another option, which our Sick Pay Clause provides for, is that you will start by paying SSP but that any sick pay payment over and above SSP is discretionary. Be aware that your discretion in this case must not be exercised perversely or irrationally, but consistently, fairly and reasonably. If you do have a discretionary sick pay scheme, it’s worth setting out the maximum amounts you will pay and the limit to the duration of sick pay (and, subject to SSP being the minimum, you’re free to specify whatever amounts or periods of time you wish). Also, consider setting out the circumstances when you know you won’t be exercising your discretion in the employee’s favour. Our sick pay clause anticipates all of this. Think carefully about the cases where you know you only want to pay SSP and nothing more and add these to your list, taking care not to be discriminatory particularly on pregnancy or disability grounds, for example, don’t put in your list that the employee won’t get discretionary sick pay if she’s absent with a pregnancy-related illness.


Contractually speaking

Except perhaps for very senior employees such as directors, it’s not advisable to make your sick pay scheme contractual. This is because you will then have bound yourself to make sick pay payments under the scheme regardless of the circumstances of the case. If you fail to make sick pay payments, not only will you be in breach of contract but also there is the risk that the employee could resign and claim constructive unfair dismissal if they have at least two years’ continuous employment.

Third party negligence

Where you do pay more than SSP (whether discretionary or contractual), if the employee’s absence from work has been caused by a third party’s negligence and they can pursue a claim against that third party for their loss of earnings, provide that any sick pay over and above SSP is paid by way of a loan to the employee only, repayable in the event that they receive compensation from the third party. Our Sick Pay Clause includes appropriate wording.