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Occupational sick pay
[ch 7: pages 210-211]An employer may provide an occupational sick pay scheme. This must pay at least the SSP rate. As this is a contractual term, the employer is allowed to set its own rules. For example, contractual sick pay can be conditional on an employee agreeing to a medical examination by a company doctor (Stirling & Mair v Meikle EAT/27/02).
An employer’s failure to follow its own rules on sick pay may well be a breach of contract and an unlawful deduction from wages (see Chapter 4). Here is a good example in which UNISON action defeated an NHS sickness absence-related pay cut:
In February 2012, health workers’ union UNISON defeated a move by Central Manchester University Foundation Trust to cut staff pay if they took too much sick leave, by supporting multiple individual employment tribunal claims.
The Trust had introduced a new rule that employees who were sick on four or more occasions a year or 18 days would be penalised by losing their incremental pay rise. As UNISON pointed out: “The nature of working in a hospital, surrounded by ill people, means you are more likely than in other jobs to become unwell”. The tribunal agreed that the new Incremental Pay Progression Policy was a breach of contract and the Trust withdrew it.
Bent and others v Central Manchester University Hospitals NHS Foundation Trust ET/2400833/11
It is a fundamental breach of contract not to pay contractual sick pay when due, even if the non-payment is due to a mistake. This is because there is an implied duty to pay wages to any employee who is ready, willing and able to work. This duty can only be overridden by a clear express contract term. In Roberts v the Governing Body of Whitecross School [2012] UKEAT/0070/12/ZT, an employer committed a fundamental breach of contract by paying half pay sick pay instead of the full pay to which Roberts was entitled. It made no difference that the school’s actions were based on an honest mistake, following wrong advice about the contractual sick pay entitlement under the relevant collective agreement, the Burgundy Book.
LRD has many examples of collectively agreed occupational sick pay schemes on its Payline database (www.lrd.org.uk/index.php?pagid=18).
Most occupational sick pay schemes set out a period of entitlement to pay. A typical scheme might pay three or six months’ full pay, followed by three or six months’ half pay.
Sometimes sick pay is discretionary. If so, the employer must not exercise that discretion arbitrarily or inconsistently, or be “irrational or perverse” (Commerzbank v Keen [2007] IRLR 132 CA), and it must act in accordance with the implied term of trust and confidence (see Chapter 3).