4. Sick pay

Although more than half the reps responding to the 2010 LRD survey recounted a general tightening up of sickness absence procedures (see Chapter 2 — Sickness policies), not many reps have reported direct cuts in the level of contractual sick pay provision to existing staff. One rep reported a cut in sick pay provision from six weeks full pay and four weeks’ half pay, to just eight weeks’ full pay (rising to ten weeks full pay after ten years’ service) with no half pay.

Another rep reported the introduction of a two tier system, with less favourable sick pay provision for new starters, whilst the entitlement of existing staff remains unchanged. Another reported the withdrawal of 26 weeks’ discretionary sick pay “due to cost”. One private sector employer in the publishing sector reported a reduction in long-term sickness benefit from “indefinite” to a maximum of five years.

Basic obligations

Employers must provide their employees with details of their sick pay entitlement as part of their written statement of employment particulars, in accordance with sections 1 and 2 of the Employment Rights Act 1996 (ERA). These details must be provided within two months of the start of the employment. The sick pay provisions do not have to be set out in the contract of employment itself. They can be set out in a separate document, but the employee must have the opportunity to read it at work and the employer must have referred them to it.

There is a statutory sick pay scheme (SSP) which provides a minimum level of sick pay to employees who qualify, but many employers pay occupational (company) sick pay at a more generous rate.

Statutory Sick Pay (SSP)

To qualify for SSP, an employee must be earning an average of at least £97 per week (for 2010/2011). SSP is paid by the employer in the same way that they would normally pay wages. Agency workers who meet the qualifying conditions are also entitled to SSP. Whoever is responsible for the deduction of national insurance from earnings is responsible for payment of SSP. Workers or employees who do not qualify for SSP may be entitled to income support or incapacity benefit which is claimed from the Department for Work and Pensions (DWP). The benefit system is undergoing wholesale review by the coalition government at the time of writing.

The first three days of sickness are referred to as “waiting days” and are not required to be paid in order to satisfy SSP rules. This means that to claim SSP, an employee or worker has to be ill for at least four days in a row (including weekends and bank holidays). However, if the individual is ill again within eight weeks, and each period of illness lasts at least four days, the two periods of sickness absence are “linked” and s/he does not have to serve the waiting days again.

SSP is only paid for the days the employee or worker would normally work, which are called “qualifying days”.

The rate of SSP is set every year (£79.15 per week for 2010/11) and is paid for a maximum of 28 weeks. After that, the employee may be entitled to claim other benefits from the DWP if s/he qualifies.

To claim SSP, the employee (or someone on their behalf) must notify the employer that s/he is sick. Employers may have their own notification procedures, but cannot insist that an employee notifies them in person, nor can they insist on a doctor’s certificate to cover the first seven days’ absence for the purpose of SSP. Employees must be allowed to self-certify. From 6 April 2010, the medical certificate for the purposes of SSP is the new “Statement of Fitness for Work” or “Fit Note”. For a discussion of the Fit Note, see Chapter 2.

Pregnant women can claim SSP unless they are sick for a pregnancy-related reason from four weeks before the baby’s expected week of birth, in which case they will start receiving Statutory Maternity Pay (if they qualify) or Maternity Allowance. Women who are receiving Statutory Maternity Pay cannot claim SSP at the same time.

Occupational/contractual sick pay

Employers must pay the equivalent of SSP as a minimum, but many provide occupational (company) sick pay that is much better than the statutory scheme. The low level of statutory sick pay (in particular, the lack of entitlement to sick pay for the first three “waiting” days) can lead to workers attending work when sick.

Contractual sick pay is specifically excluded from the scope of the Agency Workers Regulations (The AW Regs), expected to come into force on 1 October 2011. This means that employers will be able to continue paying less favourable sick pay (for example SSP only) to agency workers than the contractual sick pay offered to permanent staff without infringing the new regulations.

Public sector employers generally pay in accordance with the following scheme:

• during the first year of employment — one month’s full pay followed by (if the employee has at least four months’ service) two months’ half pay;

• after one years’ service: two months’ full pay followed by two months’ half pay;

• after two years’ service: four months’ full pay followed by four months’ half pay;

• after three years’ service: five months’ full pay followed by five months’ half pay; and

• after five years’ service: six months’ full pay followed by six months’ half pay.

Of the examples provided to LRD in the private sector, approximately a quarter offered the same sick pay as the public sector scheme. Around a further quarter paid more than the public sector, including up to one year’s full pay. Some, but not all of these require long service to qualify.

Sick pay provisions and age discrimination

It is not necessarily unlawful to pay additional sick pay according to length of service of over five years, as the age equality regulations allow age discrimination to be “justified” where employers can show that the discrimination is a reasonable way of fulfilling a legitimate business need, such as rewarding loyalty and experience and encouraging retention. However, unions have reported some employers using the age equality regulations in order to reduce sick pay benefits for those with longer service. Benefits based on length of service of up to and including five years are already exempt under the regulations and will not amount to age discrimination. Reps in workplaces where this is happening should urge their employer to follow the example of Siemens, which reduced the qualifying service criteria on its maximum sick pay of 52 weeks’ full pay from 10 years to five years.

Union solicitors Thompsons believe that employers ought to be able to rely on objective justification in many circumstances, provided they can show a “reasoned approach to the escalation of benefits based on service.”

Rules for payment

Because occupational sick pay is a contractual agreement rather than a statutory right, employers can set their own rules for payment, for example, by specifying that employees must notify the company of their absence within a specified time, or even setting out circumstances in which it will not be paid. It is essential that employees are aware of such terms, and union reps should examine sickness policies and procedures and challenge terms that are likely to result in unfairness or are potentially discriminatory. See Chapter 2 for a more detailed discussion of sickness absence policies and notification rules.

As it is part of the employment contract, sick pay entitlement cannot be changed without the agreement of the employee (or the union, where there is collective bargaining). If an employer does impose new sick pay terms without agreement, this is likely to amount to a breach of contract. However, where the basis of any element of sick pay is discretionary, as opposed to contractual, a challenge based on breach of contract will be more difficult and may not succeed unless the employer can be shown to have acted in an arbitrary and irrational way, or to have engaged in unlawful discrimination.

Although contractual change theoretically requires workforce consent, the reality in non-unionised workplaces can be very different, especially in times of economic uncertainty. This is because an employer who can produce an economic justification (such as budget constraints) for a cut in contractual sick pay can impose that change on an unwilling workforce following consultation, and any subsequent dismissal of those who are not prepared to accept the change may well be regarded as fair. This is one of the many areas where unionisation makes an enormous difference to the level of real protection offered by employment laws designed to protect the individual worker.

Custom and practice

As with all contractual terms, the details of the sick pay scheme may not be written down, even though they should be. An employee who has not been provided with written details of his/her sick pay entitlement in accordance with section 1 of the ERA (see earlier in this chapter) can apply to an employment tribunal for a statement of what this is. If there is a dispute about how much sick pay the employee is entitled to and there is nothing in writing, a tribunal will look at what has happened in the past and what the employer and employee believe the correct entitlement to be.

For example, in one case that went to the Employment Appeal Tribunal (EAT), an employee showed that she had always received full sick pay during her 15 years of employment and had never been told it was discretionary. She therefore believed she was entitled to full pay whenever she was off sick. When she was signed off work for a month, her employer paid her only SSP instead of her full pay. The EAT said that they should have paid her full pay, as their custom and practice of paying her in full on previous occasions established that they intended full sick pay to be part of her contract. In that case, the employer’s failure to pay full sick pay was a breach of contract and the employee was entitled to resign and claim constructive dismissal (Secession Ltd t/a Freud v Bellingham EAT/0069/05).

For more information on how custom and practice can affect contract terms, see Chapter 3 of LRD’s Law at Work 2010.

Discretionary sick pay

Some occupational sick pay policies state that sick pay will only be paid at the discretion of the employer (or that sick pay can be withheld at their discretion). Discretionary policies can be unfair as they risk favouritism and discrimination, and different managers may apply them in different ways. If an employer does use a discretionary system, it should be made clear what factors the employer is taking into account when exercising its discretion.

The EAT has made it clear that employers must not exercise their discretion “arbitrarily” or in a way that is likely to destroy trust and confidence.

Withholding sick pay

Someone who is off sick can expect to receive sick pay in accordance with the entitlement set out in their employment contract. If an employer refuses to pay sick pay, they must have a clear contractual right allowing them to do so, otherwise they will be in breach of contract. Failure to pay sick pay in these circumstances will also amount to an unlawful deduction of wages. Bringing a statutory claim for unlawful deduction of wages can sometimes be preferable to a claim for breach of contract, because it will prevent the employer being able to counterclaim for breach of contract for any sums the employer claims to be owed by the employee under the employment contract. Claims for unlawful deduction of wages must be brought within the usual three month time period, which is strictly enforced.

Withholding pay on the basis of doubts as to whether sickness is “genuine”

If an employee’s contract states that payment for sickness absence is conditional on management being satisfied that the absence is “genuine”, the employer must make its assessment of the genuineness or otherwise of the absence in good faith and not irrationally, taking into account the duty of mutual trust and confidence. The employer is not allowed simply to conclude that an absence is not genuine, without any specific evidence to that effect.

In Scottish Courage Limited v Guthrie (UKEAT/0788/03), the employer withheld sick pay because the company doctor disagreed with the patient’s GP as to whether or not Mr Guthrie was fit to return to work. As the tribunal pointed out, there is a difference between a genuine disagreement as to whether an employee is or is not “fit for work” (which should not impact on the employee’s sick pay entitlement) and doubts as to the “genuineness” of an absence, based on some evidence of dishonesty or intention to mislead.

The case of Mersey Rail Electrics 2002 v Taylor [2007] UKEAT/162/07 is another helpful case showing the limits on an employer’s scope to withhold sick pay. The sickness absence provisions allowed the employer to deny payment if it had “any doubt that the absence was due to reasons other than health”. The employee was off work with a stress-related condition which occurred shortly after a dispute over hours of work. Given the coincidence of time between the two events, the employer refused to pay sick pay. The employee self-certified for a week, after which she obtained medical certificates recording her condition. The EAT said that although the employer might have had doubts at first, those doubts should have been resolved by the medical certificates, which should have been accepted at face value unless there was contradictory evidence.

An employer is allowed to look beyond the sickness certificate if he has good reason to suspect that the sickness absence is not genuine. Misuse of a medical certificate is itself a disciplinary offence.

A number of employers in the examples provided to LRD specify circumstances in which sick pay will be withheld. For example, one city council sets out a number of circumstances where sick pay can be suspended. These include: abuse of the sick pay scheme, which includes failing to provide a medical certificate where required or not complying with the sickness reporting procedure; refusal to meet the manager to discuss the absence; cases where the employee’s sickness is due to their own deliberate conduct or neglect; and participation in professional sport. LRD has also seen policies that withhold sick pay for illness or injury caused whilst doing paid work for a third party.

If an employee’s doctor says that s/he is fit to return to work but the employer wants further medical checks, the employee must be paid his/her full wages while those checks are being carried out. A person who is willing to work has a common-law right to be paid (Beveridge v KLM UK EAT/1044/99 ([2000] IRLR 765).

Where a worker has been off sick with a Fit Note, there is no need for the GP to provide a certificate confirming the individual’s fitness to return to work. The fact that the GP has not signed a further medical certificate demonstrates that the employee is fit to return.

Where a GP signs a Fit Note subject to conditions, suggesting a phased return, altered hours, amended duties or workplace adaptations and the employer fails to make the suggested changes, either adequately or at all, the individual will be entitled to remain off work and in receipt of his normal sick pay entitlement until the conditions set out in the Fit Note have been met. In practice, the TUC anticipates that this will prove to be one of the most problematic issues surrounding the Fit Note. Further guidance on the Fit Note is set out in Chapter 1.

Monitoring social networking sites to check “genuineness” of absence

There is growing anecdotal evidence of employees on sick leave being disciplined as a result of information relating to their activities whilst on sick leave showing up on Facebook and other social networking websites. There is no doubt that there seems to be a growing trend amongst line managers to use social networking sites to check up on the activities of absent workers.

Although Article 8 of the European Convention on Human Rights gives a right to privacy, in practice staff who have voluntarily put information about themselves in the public domain are unlikely to receive much sympathy in any claim alleging privacy infringement. And simply looking at information that an employee has made freely available online is unlikely to amount to an infringement of the Data Protection Act 1998. (See also the related discussion of case law on the use of covert surveillance to monitor the activities of employees on sick leave, in Chapter 5).

Engaging in paid work whilst off sick

A recent case, McCann v Clydesbank College UKEAT0069/09, looked at the question of when it is lawful to dismiss an employee for engaging in paid work whilst off sick. The EAT indicated that an employer is normally likely to be justified in dismissing an employee who carries out paid work for a third party during working hours while on paid sick leave, without the employer’s permission. The main rationale for this finding is that otherwise, the employee would stand to benefit unfairly by being paid twice during his contracted hours — once by the employer through sick pay, and again by the second employer. An employee is generally not allowed to do paid work for others during normal working hours without his employer’s permission, and this situation does not change just because the employee is off sick and in receipt of sick pay.

In practice, this case illustrates the sorts of problems employees can often face when off sick, in particular with mental health issues such as stress and anxiety. Although many employers accept the theory that engaging in activity whilst off sick can be positively beneficial to recovery, especially from a stress-related condition, in practice, many employers tend to be suspicious and mistrustful.

The safest advice for an employee wanting to do any work whilst off sick (even unpaid), and whether or not during their normal contract hours, would be to talk this through with their GP and union rep (and occupational health adviser if available). Any plans should be discussed with the employer with agreement sought and recorded, and built into a proper rehabilitation and back-to-work plan.

Sickness policies and employment contracts often limit the sorts of activities, paid and unpaid, an employee is allowed to engage in whilst on paid sick leave without the employer’s permission. Employees on long term sick leave should familiarise themselves with these restrictions.

Sick pay during notice period

Employees whose employment is about to end while they are off sick should receive their full pay during their notice period, unless their contractual notice is at least a week longer than statutory notice. This is the case even if they are only receiving SSP or reduced (or no) occupational sick pay at the time their employment ends. This is down to a peculiarity of the ERA 1996, sections 88 and 87(4). Statutory notice is one week during the first year of employment (as long as the employee has worked at least one month); two weeks after two years’ employment, and an additional week for each year after that up to a maximum of 12 weeks after 12 years’ service.