Entitlement to sick pay for zero hours workers

Last updated: September 2022 | 7 min read

Employers in the UK are increasingly reliant on flexible working arrangements. Many use zero hours contracts to provide that flexibility. Despite the wide use, there are many misconceptions surrounding employment rights under zero hours contract.

One of such is that zero hours workers do not have the right to Statutory Sick Pay (‘SSP’).

A zero hours worker does have a right to Statutory Sick Pay

Workers on zero hours contract are entitled to Statutory Sick Pay as employees, if they:

  • are working under a contract of employment;

  • have done some work for their employers under the contract of employment;

  • have been ill for at least four days consecutively, including non-working days (known as the Period of Incapacity or ‘PIW’);

  • earn at least £123 per week (before tax);

  • inform their employer that they are sick within the time limit set by the employer (or 7 days if no time limit has been set); and

  • give proof of illness to their employers, only after 7 days off.

Zero hours workers can receive £99.35 a week for SSP for up to 28 weeks. However, they are not entitled to SSP for the first 3 days they are off (which are called the waiting days).

How to calculate Statutory Sick Pay for zero hours workers

In this article, we focus on working out the statutory sick pay for workers on zero hours contracts.

The calculation for the amount of SSP payable differs for workers who have been in continuous employment for 8 weeks and for zero hours workers having less than 8 weeks of continuous employment.

Does the zero hours worker's average weekly earnings cross the threshold?

To be entitled to Statutory Sick Pay, the Average Weekly Earnings (or 'AWE') must meet or exceed the Lower Earning Limit ('LEL'). In the tax year 2022-23, the LEL is £123 before tax.

One issue with calculating Average Weekly Earnings for workers under zero hours contracts is that their earnings are likely to vary week to week or month to month. In addition, some workers are paid weekly and others are paid monthly.

Consequently, the employer must work out if the worker's AWE in a Relevant Period satisfies the threshold that requires the employer to pay SSP.

What is a Relevant Period and how to work it out

A Relevant Period is the period of time used to calculate average earnings for the calculation of Statutory Sick Pay for zero hours contracts workers.

It aims to produce a fair representation of the worker's average weekly earnings.

It is quite simple to identify the relevant period.

First, the end date of the Relevant Period must be identified because this determines the start.

How to identify the end date of the Relevant Period

The end date of any relevant period is the last normal payday before the first complete day of sickness.

How to identify the start date of the Relevant Period

The start date is worked out by selecting a date no less than 8 weeks before the end date. The start of the Relevant period is the day after the previous normal payday. So the Relevant Period is at least the last full pay period.

Consider the following example:

Example of a worker who gets paid weekly

Matt has worked on a zero hours contract for his employer for the past year. He is paid weekly. He fell sick on Wednesday 10 August and notified his employer on the same day. His payday was every Friday.

If Matt's first full day of sickness was Thursday 11 August and he was paid every Friday, the last payday before his first day of sickness was Friday 5 August. This is the end date of the Relevant Period.

The start date of the relevant period was the day after the payday, at least 8 weeks before Matt's last payday. Therefore, the start date of the relevant period was Monday 6 June.

Now that Matt's employer is aware of the relevant period, they must calculate Matt's average weekly earnings.

This can easily be figured out by adding up all the earnings paid to Matt during the relevant period and dividing it by 8 (the number of weeks in the relevant period). If the average weekly earnings of Matt is at least the Lower Earnings Limit, he will be entitled to SSP.

Example of a worker who gets paid monthly

Rachel has worked for her employer on a zero hours contract for the past 6 months and is paid on the last working day of the month. She fell ill on Tuesday 23 August. To calculate Rachel's Average Weekly Earnings, her employer will first have to work out the Relevant Period.

In this case, the last payday before Rachel's first day of sickness was Friday 29 July. This means the payday at least 8 weeks before was Tuesday 31 May. So the Relevant Period is 1 June to 29 July.

All Rachel's employer now has to do is follow the following simple steps:

First, divide the total earnings paid to Rachel in the Relevant Period by the total number of months in the Relevant Period (which in this case is 2 months).

Then multiply that answer by 12 (which gives the annual income).

Lastly, divide the figure derived from step 2 by 52 (as there are 52 weeks in a year). This gives the Average Weekly Earnings in a year.

If this figure is less than the Lower Earnings Limit then Rachel will not be entitled to SSP.

What if the zero hours worker does not have 8 weeks of earnings

If the zero hours worker has not completed 8 weeks of continuous service before falling ill, they may still be entitled to SSP.

Calculating statutory sick pay where the worker has not completed 8 weeks of continuous employment

Average Weekly Earnings will be calculated in the same way as shown above. However, the Relevant Period will be the total amount of employment before the worker's first day of sickness.

Consider the following example:

Alan has been working for his employer for the past 3 weeks and 3 days (24 days) on a zero hours contract. Alan is paid weekly on a Wednesday.

Alan fell ill and notified his employer the same day. Since Alan did not have 8 weeks of continuous service, using the help of a calendar, Alan's employer can quite easily work out the Relevant Period - the number of days of employment, which is 24.

Alan's employer can work out his Average Weekly Earnings by:

  • dividing his total amount of earnings by the total number of days he has worked (which gives his average daily earnings); and
  • multiplying that figure by 7 (regardless of the actual number of days worked, the calculation of days is always on the basis of a 7 day week).

You may want to find out exactly what is a zero hours contract and the different employment rights and obligations that flow from them or about calculating paid holiday entitlement for zero hours workers.

Net Lawman offers a wide range of employment contract templates, including a zero hours contract template that covers all legal requirements and provides full protection to the employer.

© 2000 - 2024 Net Lawman Limited.
All rights reserved