Sick Pay and Sickness Absence in the UK – Entitlements, Linked Periods, and Rules

Managing sickness absence and calculating sick pay can be complex. In practice, HR departments and payroll managers regularly face crucial questions: Is this a new period of sickness or a linked absence? How do waiting days apply, and what are the employer's record-keeping obligations?

The Basic Entitlement: Statutory Sick Pay (SSP) and Occupational Schemes

Under the Social Security Contributions and Benefits Act 1992 and the Statutory Sick Pay (General) Regulations 1982, eligible employees who are incapable of work due to sickness or injury are entitled to Statutory Sick Pay (SSP).

Key statutory principles include:

• Period of Incapacity for Work (PIW): Sickness must last for at least 4 consecutive days (including non-working days, weekends, and bank holidays) to form a PIW.
• Qualifying Days (QDs): These are the days the employee normally works under their contract of employment. SSP is calculated and paid only for qualifying days.
• Duration: SSP is payable for a maximum of 28 weeks within a single PIW or across linked periods. Once the 28-week statutory maximum is reached, the employer must issue form SSP1, enabling the employee to apply for state benefits such as Employment and Support Allowance (ESA).
• Occupational / Contractual Sick Pay (Company Sick Pay): Many employers provide contractual sick pay schemes that offer enhanced remuneration (such as full base pay for a set number of weeks or months). Where contractual pay is provided, it can be offset against the employer's statutory SSP liability, provided the total paid never falls below the statutory SSP minimum.

Waiting Days and Eligibility Criteria

Under the standard SSP statutory framework, SSP is not payable for the first 3 qualifying days of sickness absence, known as waiting days. Payment begins on the 4th qualifying day.

To qualify for SSP, an employee must:

1. Have an employment contract with the employer (qualifying as an employee for Class 1 National Insurance purposes),
2. Have earned an average of at least the Lower Earnings Limit (LEL) for National Insurance in the relevant 8-week period prior to sickness,
3. Have formed a valid PIW (at least 4 consecutive calendar days of illness),
4. Have notified the employer of their absence within the required timeframe (or within 7 days by statutory default).

Linked Periods of Incapacity (Recurring Illness)

When periods are linked:

• The employee does not have to serve the 3 unpaid waiting days again in the subsequent linked period (provided they were fully served during the previous PIW).
• The weeks of SSP paid in the previous absence count towards the overall 28-week statutory maximum.
• If more than 8 weeks elapse between absences, the new absence forms a separate PIW, requiring fresh waiting days and resetting the 28-week SSP cap.

In occupational / contractual sick pay policies, employers often apply rolling 12-month review periods to assess whether contractual full-pay or half-pay entitlements have been exhausted.

Medical Confidentiality, Fit Notes, and UK GDPR

Under the UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018 (DPA 2018), health data is classified as special category data. Employers have a legal obligation under employment law to process absence records to administer sick pay, but they must adhere to data minimisation principles and the Information Commissioner's Office (ICO) Employment Practices Guidance:

• Fit notes contain medical advice regarding whether an employee is "not fit for work" or "may be fit for work" subject to phased returns, altered hours, or amended duties.
• Employers must store fit notes, occupational health reports, and medical self-certifications securely with restricted access.
• While employers can ask about functional limitations or workplace adjustments, detailed underlying medical notes must not be circulated beyond authorized HR and payroll personnel.

Calculation of Sick Pay and Working Hours

For Statutory Sick Pay, the weekly statutory rate is paid as a daily rate based on the employee's agreed qualifying days in that week (e.g. dividing the weekly SSP rate by 5 for a standard 5-day working week).

For contractual sick pay schemes operating on a loss-of-pay principle (maintaining regular pay during sickness):

Included in regular contractual calculations:

• Basic salary / contracted hourly wages,
• Regular, guaranteed allowances and salary sacrifice arrangements.

Variable earnings considerations:

• Variable shift premiums, unsocial hours payments, and non-guaranteed overtime should be clearly addressed in the written statement of employment particulars (Section 1 of the Employment Rights Act 1996) and the company sickness policy.
• For employees with irregular hours, calculating average pay often relies on the standard 52-week reference period used under the Employment Rights Act 1996 for statutory wage assessments.

Employer Costs and Statutory Record-Keeping

Employers are directly responsible for funding Statutory Sick Pay and contractual sick pay. Accurate payroll and absence records must be retained:

• HMRC Compliance: The separate statutory duty to keep SSP records was revoked in 2014, but HMRC still expects employers to retain records of statutory payments — including SSP dates and qualifying days — as part of their general payroll records for at least 3 years after the end of the relevant tax year.
• National Minimum Wage Compliance: Employers must maintain working time and remuneration records for at least 6 years under the National Minimum Wage Act 1998 to demonstrate that deductions or absences do not breach statutory wage floors.

Sickness During Annual Leave and Public Holidays

Under UK statutory law and established European Court of Justice (ECJ) case law upheld under retained EU employment principles:

• Illness during scheduled holiday: If an employee falls sick before or during pre-booked annual leave, they are entitled to convert that period to sick leave (subject to proper notification and medical evidence) and reclaim their statutory annual leave to take at a later date.
• Accrual of holiday during long-term sickness: Employees continue to accrue their statutory annual leave entitlement (5.6 weeks under the Working Time Regulations 1998) while off sick. If they are unable to take their holiday due to prolonged illness, they may carry over untaken statutory leave for up to 18 months from the end of the leave year in which it accrued.
• Bank holidays: If a public holiday falls during an employee's period of sickness absence, its treatment depends on the contract of employment (i.e. whether bank holidays are included in the employee's 5.6-week statutory annual leave entitlement or provided as additional contractual leave).

Statutory Framework and Key Authorities

Key Legislation and Codes of Practice

• Social Security Contributions and Benefits Act 1992 — Statutory Sick Pay entitlement, qualifying conditions, and 28-week limit.
• Statutory Sick Pay (General) Regulations 1982 (SI 1982/894) — Rules on qualifying days, waiting days, and linked periods of incapacity.
• Employment Rights Act 1996 (ERA 1996) — Written statement of sickness terms (Section 1), protection against unlawful deductions from wages (Section 13).
• Working Time Regulations 1998 (SI 1998/1833) — Statutory annual leave accrual (Regulations 13 and 13A) during periods of incapacity.
• Data Protection Act 2018 & UK GDPR — Processing employee health data and medical records under ICO guidance.
• ACAS Code of Practice and Guidance — Managing sickness absence, fit notes, and return-to-work procedures.

Status of assessment: August 2026. This article provides general operational and HR guidance for employers in England, Wales, and Scotland and does not constitute formal legal advice.