PIXIE PAYROLL Blog

Having just recovered from my short hospital stay, I thought an apt subject for this month’s blog is to give an overview of Statutory Sick Pay.

Statutory Sick Pay (SSP) is a payment an employee receives from their employer if they are ill and unable to work for a number of days. There is a legal entitlement to SSP as long as the employee meets a number of eligibility criteria.

Rate of SSP

The flat rate for SSP is £99.35 a week from the fourth day that an employee is unwell. Employees do not receive SSP for the first three days of illness although there was a now-closed exception to this during the pandemic where employees who had tested positive for Covid-19 were paid from the first day.

Eligibility for SSP

Most employees will be eligible for SSP although there are some exceptions. An employee must have a current employment contract and have done some work for the employer and must earn an average of at least £123 per week.

They must have been ill for at least 4 days in a row and have notified their employer of their illness in the way the employer asks or is detailed in their Sickness Policy. For example, if the policy says the employee must phone in sick by 9am on the first day, they may lose SSP entitlement if they don’t follow that policy.

Employees who are on maternity leave, have been on benefits before starting work for the employer, are in custody or on strike are not entitled to SSP.

Employees should also provide a ‘fit note’ (or sick note) from their doctor or hospital after the first seven days that details the reason why they have been unable to work. The time between the fourth day (the first day SSP is paid) and the seventh day can be covered by self-certification.

How long does SSP last?

Employees can only receive SSP for a maximum of 28 weeks.

An exception to this is if an employee has a series of linked absences if they have a long-term condition. An example might be where an employee has a week off and then successfully returns to work. Then a recurrence of the illness within 8 weeks means they need to take more time off (must be at least four days). This pattern can continue for up to 3 years until the employee can no long receive SSP.

Occupational sick pay

For many full-time employees, receiving only £99.35 a week might mean a significant drop in wages and the financial impact of being ill can add to the overall anxiety about the situation. Employers can therefore choose to top up pay over the statutory rate.

The details of this should be in the Sickness Policy but an example might be full pay for the first eight weeks of sickness, then only half pay for the next eight weeks and the statutory rate for the final 12 weeks.

After SSP

When an employee has used all their entitlement to SSP (usually after 28 weeks) and they are still not able to return to work, they can claim Universal Credit or Employment and Support Allowance.

This is also a situation where an employer’s Sickness Policy will come into play as there will be guidance on what to do and how to work with the employee to decide the best way forward.

It’s not unusual for employers to have to pay SSP so it’s best to be prepared both for short term sickness such as ‘flu or injury and longer term sickness due to serious illness. If you need any help with SSP, just get in touch.

National Insurance isn’t usually something we give much thought to apart from when we see it as another deduction on our payslips but as it has been in the news a bit lately, we thought it deserved a blog post all of its own.

Origins of National Insurance

The concept of National Insurance was first introduced through the National Insurance Act 1911 when for the first time, workers would be able to claim benefits based on contributions they and their employers had made. Employees had a card to which stamps were added that their employer got from the Post Office to prove their contributions. If they left that job, they took those cards to their new job and that’s why we still say ‘getting your cards’ when someone leaves a job and ‘paying the stamp’ about National Insurance in general.

The National Insurance scheme that was introduced in 1911 offered pensions, health and unemployment benefits for the first time and undoubtedly made a real difference to peoples’ lives, especially older widows.

Then, even while the Second World War was still raging, the idea of expanding National Insurance was first proposed and in 1948, the new Welfare State was launched which it was hoped, would help everyone of all classes from cradle to grave. This included, of course, the establishment of the National Health Service.

What is our National Insurance spent on?

National Insurance contributions are ringfenced for welfare spending and can’t be used for general government expenditure. As has been discussed a lot recently, it is used for funding the NHS and health and social care but also covers benefits such as Universal Credit, Statutory Sick Pay and entitlements such as the UK State Pension.

We all have a National Insurance Number (NINO) and our individual contributions are credited to our account as some of the benefits such as the State Pension are contributory; i.e. you can only claim them if you have previously contributed a sufficient amount.

Classes of National Insurance deductions

There are 4 main classes of National Insurance deductions:

• Class 1: payable by both employees and employers
• Class 2: a fixed weekly amount paid by the self-employed
• Class 3: voluntary top-ups for those who have missed some contributions
• Class 4: payable by the self-employed on a portion of their profits

National Insurance in 2022/23

Many of us will have already seen our National Insurance Contributions increase since April 2022. The rate increased by 1.25 percentage points to 13.25% in April 2022 with the plan being that the additional revenue would be placed directly into the NHS.

From April 2023, this increase will be renamed the Health & Social Care Levy which has been designed to deal with the backlog of patients waiting for treatment after the pandemic and to bring extra funds into the care sector.

Currently, anyone earning under £9,880 does not pay any National Insurance but that threshold will increase to £12,570 on 6^th July 2022 so it will have parity with the Income Tax threshold.

That means that although many are paying more National Insurance now, they should see their contributions fall again in July.

If you have any questions about National Insurance, the employers’ contribution or about which Class you should be paying, just get in touch.

Normally it is the Chancellor’s Autumn Budget that is much anticipated but this year, with the increase in the cost of living, huge fuel and utilities price increases as well as the impact of the war in Ukraine, his Spring Statement also generated much interest.

Rishi Sunak delivered his statement to Parliament on Wednesday and here are some of the key points for employers and employees.

National Insurance

Although he didn’t scrap the planned increase in NICs that’s due to come into force in April (you can read about that here), he did announce another big change to National Insurance which is that the threshold for paying it will increase by around £3,000 to £12,570 in July 2022. That puts it on par with income tax and means people earning £12,569 or less won’t now have any taxation deductions taken from their pay packet after the change comes into effect.

That should help mitigate against the rate increase and so should mean most employees won’t see too much of a difference although employers will still be paying a higher Employers’ NIC rate.

Fuel Duty

The sudden and dramatic increase in petrol and diesel prices we have seen recently have affected all of us. Relatively low paid workers such as carers who use cars to get around have been especially hard hit and so the 5p reduction in fuel duty for 12 months will be welcome.

It should mean that we will see an immediate reduction in price at the pumps from 6pm on Wednesday.

Household Support Fund

The Chancellor has doubled the size of the Household Support Fund by adding £500m to the pot. The fund is administered by local authorities and here in Cornwall, £4.5m has already been provided and is being distributed by the council, charities and other partner organisations to support those in need. Although the figures haven’t been confirmed, we can therefore expect a further £4.5m to make its way to us.

Have a look at this webpage for more information and links to financial crisis help and support: https://www.cornwall.gov.uk/benefits-and-support/household-support-fund/

Employment Allowance

Employers whose Class 1 NIC liabilities were less than £100,000 in the last tax year can claim Employment Allowance to offset against National Insurance liabilities they have now. It is currently set at £4,000 but it was announced today that this will be increased to £5,000 immediately.

In the same way the NIC threshold was raised to mitigate against the tax increase for employees, this will help some employers reduce the impact of the extra taxation.

To check whether your business is eligible for the Allowance, click here: https://www.gov.uk/claim-employment-allowance

Future tax plans

The Chancellor also announced a plan to reduce the rate of income tax by 1% to 19% in 2024 and that he would be looking at a range of measures to encourage greater productivity, innovation and training with businesses and employers.

There was also a startling statistic that it is predicted there will be 400,000 fewer people in the workforce in the coming years compared to before the pandemic, caused by a combination of early retirement, migrants returning home and ill-health. That means the pressure on recruitment and managing staff shortages isn’t going away and employers will have to work hard to attract employees to their businesses.

As always, if you have any questions about how the measures in the Spring Statement will affect your payroll or employees, just get in touch.