Paying Staff

The rules on statutory sick pay and the minimum wage

Remuneration FAQ

How much is the national minimum wage and how does it operate?

The national minimum wage is �4.85 an hour for workers aged over 21 and �4.10 an hour for 18 to 21 year olds (the rates are due to rise to �5.05 and �4.25 from October 2005, and to �5.35 and �4.45 in October 2006). There is also a minimum training wage for new employees over 21 of �4.10 an hour, but this wage applies only to workers doing accredited training and for a maximum of 6 months. A worker's hourly rate of pay may include such payments as bonuses and performance-related pay. Output or piece workers (including homeworkers who get paid according to how many ‘pieces’ or sales they make) are entitled to the minimum wage through ‘fair piece rates’. This system is being introduced through 2004 and 2005, so that employers will have to pay the minimum wage either: 1) for every hour an output worker actually works or 2) agree an average output per hour and then pay the minimum wage for this (this ‘fair piece rate’ increases to 120% of the minimum wage in April 2005).

A new national minimum wage for 16 and 17 year olds of �3 an hour was introduced in October 2004 (there are no plans to increase this rate in 2005, and it will be reviewed in February 2006). Exemptions from the minimum wage are the self-employed, volunteers, apprentices, members of the armed services and people working as part of a family.

Employers must keep records that show that they are paying the national minimum wage, although it is up to an employer what form these records take.

Workers have a right to see their pay records and legal rights to the national minimum wage. The Inland Revenue enforces the legislation and employers can be taken to an employment tribunal or to court if they fail to pay the minimum wage. There are financial penalties for failure to comply with national minimum wage legislation.

For further information see the Inland Revenue web site.

How is entitlement to Statutory Sick Pay calculated and how is it paid?

Statutory Sick Pay (SSP) is a payment made by employers to their employees who are sick and qualify for payment.

To be entitled to SSP, employees must:

An employee's weekly earnings are calculated by adding up all normal paydays over a period of the last eight weeks, including the last normal payday, before the employee's sickness began. All paydays during this period are included, even if the employee did not receive payment on one or more of these days (during unpaid leave for example).

For NICs purposes all payment received from employers, including sick pay, holiday pay, overtime and bonuses is taken into account. However, occupational pensions and state retirement pensions are not.

SSP is usually paid to employees in the same way they receive their normal wages or salary and on their normal payday. Employers may deduct tax from SSP and if employees are receiving further payments on top of SSP, they may be liable to make NICs. Employers are also legally entitled to make deductions such as pension contributions, trade union subscriptions and attachment of earnings from SSP.

Employers who operate company sick pay schemes, must make payments to employees at least equal to SSP, if the employee is eligible and equal to the higher of the two (if the company's sick pay is higher than SSP for example).

Employers who pay sick pay which is equal to or better than SPP, are no longer required to keep full SSP records. This may mean that SSP payments may not appear on employee's pay slips. The Inland Revenue advises that in such cases, employees keep a record of their sickness and any medical evidence supplied to their employer.

For further information see the Department of Work and Pensions and Inland Revenue (whose local offices deal with any disputes) web sites.

What are the rules for receiving Statutory Sick Pay?

Statutory Sick Pay (SSP) is a payment made by employers to their employees who are sick and qualify for payment (under the Social Contributions and Benefits Act 1992 and the Statutory Sick Pay Act 1994). To qualify, a person must:

SSP is paid at a weekly flat rate and is only payable for 'qualifying days', the days an employee usually works. It is not payable for the first three days in a PIW, known as 'waiting days'.

SSP can be received for a maximum of up to 28 weeks in a spell of sickness and any spells of sickness during the same employment which last more than four days are linked as one if they are separated by eight weeks or less.

For further information see the Department of Work and Pensions and Inland Revenue web sites.

Who is not eligible for Statutory Sick Pay?

Statutory Sick Pay (SSP) is a payment made by employers to their employees who are sick and qualify for payment. People who are not treated as employees do not qualify for SSP and they include:

For further information see the Department of Work and Pensions and Inland Revenue web sites.

What are the rules for maternity pay and are there special arrangements for small businesses?

Employees get Statutory Maternity Pay (SMP) if they have worked continuously for the same employer for at least 26 weeks up to the 15th week before their child is due; and they must be earning enough for National Insurance purposes. An employee must give their employer at least 4 weeks notice before stopping work to claim SMP – they will need to give medical evidence on a form MATB1 signed by a doctor or midwife.

SMP is paid for 26 weeks (the government announced plans in 2005 to extend this to 39 and then 52 weeks) – employers must pay women on maternity leave 90 per cent of their average earnings for 6 weeks and then �106 (from April 2005), or 90 per cent of average earnings if less, for the remaining 20 weeks. From April 2005, average earnings must take into account any pay rise that a woman would have received if still at work.

Employers can recover 92 per cent of SMP payments, but small businesses with National Insurance Contributions of less than �40,000 can recover 104.5 per cent (all the SMP payment plus help with costs). There are also special rules relating to additional maternity leave (leave of 52 weeks) for businesses employing five or fewer people (including the woman getting this leave) – at the point where her maternity leave ends, a small business does not have to reinstate her if this is not ‘reasonably practicable’ (in disputes, Employment Tribunals decide on what this means).

The Inland Revenue’s SMP calculator works out an employee’s entitlement to SMP and an employer’s funding to cover it.

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