Three common misconceptions about sick pay

With recent figures showing that many employees have little idea of their sick pay entitlements, Leon Deakin from Coffin Mew explores three common misconceptions.

A recent survey carried out by Direct Line highlighted misconceptions as to what payments an employee is entitled to when they are off work sick.

According to the insurer’s research, only 4% of employees know how much statutory sick pay they are entitled to, leaving many people at risk of struggling financially if they have a long-term condition.

Many mistakenly believe that, on average, they would receive full salary for up to three and a half months. Unfortunately, for most this is simply not the case.

No automatic entitlement to full pay

For starters, there is no statutory right to receive full pay for time spent on sick leave at all.

Instead, the law only provides for employees to receive statutory sick pay (SSP), which pays out for up to 28 weeks.

Of course, some lucky individuals may also be entitled to enhanced sick pay under the terms of their contract of employment or sickness policy.

Understandably, this means that the amount of sick pay will often vary from one employer to another.

However, as the rate of SSP is currently £89.35 per week, individuals face the real prospect of financial hardship should their period of sickness extend for some time and their employer not offer enhanced pay.

This is compounded by the fact that SSP is technically only payable from the fourth qualifying day of absence.

Confusion around notice pay

So what notice pay do employees receive if their contract of employment comes to an end while they are signed off as unwell and in receipt of sick pay?

Unfortunately, there is no hard and fast answer to this one. It depends upon an employee’s individual circumstances or, more specifically, the terms of their contract.

According to the law, the minimum notice for employees with less than two years of continuous service is one week.

Employees with more than two years of continuous service must receive at least one week’s notice for each continuous year worked, subject to a cap of 12 weeks.

Of course, employers can voluntarily choose to exceed this minimum entitlement by including a longer notice period in the contract.

The Employment Rights Act also sets out that employees should be paid in full for the statutory minimum notice period in cases where they cannot work due to absence caused by ill health.

This is where things get a little strange. If an employee’s contractual period of notice exceeds the statutory entitlement to notice by at least one week (ie the employer has contractually provided for at least one week more notice than the minimum entitlement), the right to full pay does not apply and instead the employee is only entitled to SSP.

For example, if an employee’s contract of employment states that they are entitled to five weeks’ notice and his or her statutory minimum notice is only three weeks, then there is no obligation for the employee to be paid normal pay while sick during their notice period.

Conversely if they are only entitled to statutory notice they are entitled to full pay. Of course, if employees exhaust their SSP they are not entitled to any pay.

Health insurance entitlements

Some employers provide permanent health insurance (PHI), which pays employees their salary (in whole or in part) when they are unable to work due to sickness absence, if the condition they are suffering from meets certain qualifying criteria prescribed by the insurer.

An employee’s entitlements, rights and qualification requirements will obviously depend upon each specific policy. However, for an employee to benefit from the salary cover, most PHI schemes require that the employee remain in employment.

So, what happens if an employee’s contract of employment is terminated when they are either entitled to receive or in receipt of PHI?

Ultimately, they could lose their entitlement to receive a benefit under the insurance scheme.

However, as most schemes are put in place specifically to ensure employees receive some protection if unwell, this could give rise to a potential breach of contract claim if employees argue they have been deprived of the payout from a claim.

If their condition is serious or long lasting, this may have been paid out over many years and give rise to a potentially expensive lawsuit. For obvious reasons this is a complex area of law and therefore one to take advice on.

Leon Deakin

About Leon Deakin

Leon Deakin is head of employment at law firm Coffin Mew
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