Understanding occupational sick pay

Offering to support employees during challenging times is a great way to show you care about your employees and to attract and retain talent at your business. Occupational Sick Pay (OSP), also known as company sick pay, plays a big part in maintaining someone’s financial stability when off sick and shows your commitment to employee wellbeing. But what exactly is OSP, how is it calculated and how does it differ from Statutory Sick pay (SSP)? This guide is here to help business owners like you understand OSP and put it in place effectively in your business.

 

What is occupational sick pay?

OSP is an employer-provided benefit where employees get paid during periods of sickness absence. Unlike SSP, it’s not a legal requirement and is only a contractual benefit which you determine entirely as an employer and outline in the employee’s contract.

The idea of OSP is to offer more financial assistance to employees beyond what’s required by law, and reflects your dedication to employee health and wellbeing – in turn improving employee engagement, job satisfaction and retention. You can tailor OSP policies to suit your business needs, and could provide either a full salary or percentage of their salary for any period of time that you choose.

 

How much is occupational sick pay?

The amount of OSP an employee is entitled to could vary depending on a few things, but it’ll be dictated by whatever your company policy is. Here’s a few things to consider:

Calculation methods

OSP payments are usually calculated as a percentage of the employee’s regular salary, or as the full salary for a set period, often followed by a reduced percentage for another set period. For example, you might offer your staff 100% of their salary for the first eight weeks, followed by 50% for the next eight weeks.

The part of the contract that explains OSP entitlement will usually say it covers and adds to SSP for that time. This makes it clear that the employee doesn’t get two separate payments and that SSP doesn’t just kick in after OSP is used up.

What might influence this amount?

There are a few different factors that might affect how much OSP you choose to give, including:

• Length of employment – some companies tie OSP benefits to how long the employee has been with them. So, employees with longer service might receive higher payments or extended periods of sick pay.
• Extent of illness or recovery time – the duration of sick pay offered might depend on how severe the illness is, and long-term illnesses might warrant a different pay-scale, but you need to make sure you aren’t being discriminatory if you do this. Judging the severity or likely duration of different illnesses in a consistent and fair way can be difficult, so we’d recommend seeking advice from an Employment Law professional if you’re not sure how to do this.
• Contractual agreements – OSP entitlements and amounts have to align with what’s been agreed on in the employee’s contract. A lot of contracts say that OSP entitlement is partly or fully up to the employer’s discretion. However, sticking to that discretion in a fair and consistent way without seeming unfair or discriminatory can be tricky.

You have to make sure your OSP policy is clearly written and readily available to employees. Clear communication around the criteria, calculation methods and duration of sick pay is vital so you stay transparent and avoid misunderstandings.

 

Differences between SSP and OSP

It’s key for both employers and employees to understand the difference between SSP and OSP. Both relate to financial support during periods of absence, but they serve different purposes and come with different criteria.

Key differences

• SSP is a legal minimum employers have to provide if an employee meets eligibility requirements. For the 2024/25 tax year, SSP is set at £116.75 per week for up to 28 weeks.
• OSP is optional and offered at your discretion as an employer, and it’s usually higher and can last longer than SSP.

Benefits and limitations

Benefits of SSP

• You’ll fulfil your legal obligation.
• It’s straightforward and standardised across workplaces.

Limitations of SSP

• The weekly amount is fixed and might not cover an employee’s financial needs.
• It’s generally not enough for employees suffering long-term illnesses.

Benefits of OSP

• It improves employee trust and satisfaction by offering better financial support.
• Encourages employee loyalty and positions your company as a fair and supportive employer.

Limitations of OSP

• It can be quite costly for employers.
• It could sometimes incentivise longer or more frequent absences.
• If it’s not managed properly, it could cause policy misunderstandings or disputes with your employees.

It’s important that you carry out a cost-benefit analysis to see exactly how adding OSP could align with your business goals.

 

Best practices for employers

Like we’ve already said, OSP shows your commitment to employee wellbeing – but creating an implementing a fair and transparent OSP policy is critical. Here are the best ways to make sure you get it right.

Develop clear sick pay policies

Clarity is fundamental. Put together a clear and transparent OSP policy, making sure that all the relevant details like eligibility criteria, payment scales and duration are outlined. Include examples or scenarios to make the policy easier to understand.

Ensure fairness

Establish guidelines that treat all employees equitably. Your policy has to align with employment laws and the Equality Act 2010, and it has to be consistent across different positions and teams. We’d recommend consulting with an Employment Law advisor to make sure you’re getting it right.

Communicate effectively

Make sure your OSP policy is easily accessible – include it in employee handbooks, internal HR portals and onboarding materials. Train managers so they know the policy and can provide accurate guidance to employees when they need it.

Encourage compliance

Employers and employees need to stick to OSP policies. Make sure you clearly set out expectations for employees, like providing medical certificates or other documentation.

 

Citation – by your side

As an employer, you’ll have to deal with sickness absence at some point. But it can have an impact on your business and it’s important that you’re prepared, which is what we’re here for. Our HR and Employment Law consultants can help you create an OSP policy and implement it effectively – so if you want more help or want to learn more about our HR & Employment Law services, fill in the form on this page or contact us on 0345 844 1111.