Occupational sick pay: A guide for UK employers

Managing sickness absence is an important part of supporting employees while ensuring payroll remains accurate and compliant. For many employers, offering occupational sick pay can provide additional financial support beyond Statutory Sick Pay (SSP), helping employees recover without the added pressure of a reduced income.

In fact, according to the latest figures, 148.8 million working days were lost because of sickness or injury in the UK in 2025, equivalent to an average of 4.4 days per worker. As sickness absence remains a reality for organisations of every size, having a clear occupational sick pay policy can help employers support employee wellbeing, improve consistency and manage payroll more effectively.

In this guide, we'll explain the occupational sick pay meaning, how occupational sick pay differs from Statutory Sick Pay, who may be entitled to it and what employers should consider when creating an occupational sick pay scheme.

What is occupational sick pay?

Occupational sick pay (OSP) is an employer-provided benefit that offers employees financial support when they are unable to work due to illness or injury. Unlike Statutory Sick Pay (SSP), there is no legal requirement for employers to provide occupational sick pay. Instead, businesses can choose whether to offer it and determine the terms of their scheme. 

What does occupational sick pay mean? 

In the UK, occupational sick pay refers to any sick pay provided by an employer that goes beyond the statutory minimum set by the Government. Employers decide how much employees receive, how long payments last and who is eligible, provided any statutory entitlements are still met.

Many employers choose to offer occupational sick pay as part of a wider employee benefits package. Schemes vary between organisations, with some providing full pay for a set period before reducing to half pay, while others offer enhanced payments alongside Statutory Sick Pay.

How does an occupational sick pay scheme work?

Employers are responsible for setting the eligibility criteria, payment levels and duration of sick pay, which are then communicated through employment contracts or an occupational sick pay policy.

A scheme may include requirements such as:

• Completing a probationary period before becoming eligible.

• Reporting sickness within a specified timeframe.

• Providing medical evidence, such as a fit note, after a certain number of days.

• Participating in return-to-work meetings following longer periods of absence.

📌 Example

A company's occupational sick pay policy may provide employees with six weeks' full pay, followed by six weeks' half pay, before moving onto Statutory Sick Pay if the employee remains eligible. Another employer may choose to offer enhanced sick pay only after an employee has completed their probationary period.

Occupational sick pay vs Statutory Sick Pay (SSP)

Although occupational sick pay and Statutory Sick Pay (SSP) both provide financial support when employees are unable to work due to illness, they are not the same. While SSP is the legal minimum employers must provide to eligible employees, occupational sick pay is an enhanced benefit that employers can choose to offer through their own company policy. 

What are the main differences between SSP and OSP?

📌 Example

An employee earning £700 per week may receive full salary for the first eight weeks of sickness under their employer's occupational sick pay scheme. Once this period ends, the employer may continue to provide enhanced sick pay or move the employee onto Statutory Sick Pay, depending on the terms of the policy.

Can employees receive occupational sick pay and SSP?

In many cases, yes. Employers often use occupational sick pay and SSP together, with occupational sick leave incorporating the statutory amount employees are entitled to receive.

For example, if an employer offers full salary during sickness absence, this payment may include the Statutory Sick Pay entitlement rather than being paid in addition to it. How the payments interact will depend on the terms of the employer's occupational sick pay policy.

💡 Good to know

Following the Statutory Sick Pay reforms introduced in April 2026, eligible employees can receive SSP from the first day of sickness absence, with the Lower Earnings Limit removed and payments based on the lower of 80% of Average Weekly Earnings or the statutory weekly rate. Employers offering occupational sick pay should ensure their policies reflect the latest statutory requirements.

Who is entitled to occupational sick pay?

Unlike Statutory Sick Pay (SSP), there are no statutory rules that determine who must receive occupational sick pay. Employers can decide whether to offer an occupational sick pay scheme and set their own eligibility criteria, provided these are applied fairly and comply with employment laws and legislation. 

Occupational sick pay entitlement

Occupational sick pay entitlement will vary depending on the employer's policy. Some organisations offer enhanced sick pay from an employee's first day of employment, while others require employees to complete a probationary period before becoming eligible. Whatever the criteria, they should be applied consistently and clearly explained to employees. 

👉 To note

Eligibility criteria should be documented in employment contracts or a written occupational sick pay policy. This helps ensure employees understand their entitlement and supports consistent decision-making across the organisation.

What should an occupational sick pay policy include?

An occupational sick pay policy will typically include:

• Who is eligible for occupational sick pay?

• How employees should report sickness absence.

• When medical evidence is required.

• How much occupational sick pay will employees receive?

• How long will enhanced sick pay be paid?

• How occupational sick pay interacts with Statutory Sick Pay.

• Return-to-work procedures following longer periods of sickness absence.

Reviewing your policy regularly can also help ensure it reflects changes to employment legislation and your organisation's needs.

💡 Good to know

Although employers have flexibility when designing an occupational sick pay scheme, they must continue to meet their statutory obligations, including providing Statutory Sick Pay to eligible employees in accordance with current legislation.

How much occupational sick pay do employees receive?

There is no statutory rate for occupational sick pay. Unlike Statutory Sick Pay, employers decide how much employees receive and how long enhanced payments will continue. As a result, occupational sick pay schemes can vary significantly between organisations.  

Is occupational sick pay full pay?

Occupational sick pay doesn't always mean employees receive their full salary. While some employers offer full pay throughout a period of sickness absence, others gradually reduce payments over time or provide enhanced pay alongside Statutory Sick Pay.

The level of support will depend on the employer's policy and may take into account factors such as:

• Length of service.

• Employment contract.

• Previous sickness absence.

• Duration of the absence.

• Business policy and available benefits.

Occupational sick pay examples

An employer may offer: 

👉 To note

This is just an example. Every organisation can design its own occupational sick pay scheme.

How does occupational sick pay appear on a payslip?

If an employee receives occupational sick pay, it will usually appear as a separate earnings line or as part of their contractual pay on their payslip, depending on how payroll has been configured.

Where occupational sick pay is paid alongside Statutory Sick Pay, employers should ensure payslips clearly show how payments have been calculated. This improves transparency and helps employees understand what they have been paid during periods of sickness absence.

Why offer an occupational sick pay scheme?

Providing an occupational sick pay scheme can help employers support employee wellbeing while strengthening their wider employee benefits offering. Although enhanced sick pay is not a legal requirement, many organisations choose to provide it as part of a competitive employment package. 

Improving employee wellbeing

Illness can have both financial and personal consequences for employees. By offering enhanced sick pay, employers can help reduce financial uncertainty and give employees the confidence to take the time they need to recover.

Providing this support may also contribute to a more positive employee experience and reinforce a culture where employee well-being is prioritised.

📌 Example

An employee recovering from surgery may need several weeks away from work. Receiving occupational sick pay during this period can help reduce financial concerns, allowing them to focus on their recovery before returning to work.

Supporting your business

Alongside supporting employees, it may help organisations:

• Strengthen their employee value proposition.

• Improve recruitment and retention.

• Encourage employees to recover fully before returning to work.

• Promote consistent absence management.

• Support a positive culture and encourage happiness in the workplace.

Managing occupational sick pay effectively

Managing sickness absence manually can become increasingly challenging as organisations grow. Tracking eligibility, applying company sick pay rules and ensuring payroll calculations remain accurate all require clear processes and reliable record-keeping.  

Keeping accurate sickness records

Accurate records should include:

• Dates of sickness absence.

• Occupational sick pay entitlement.

• Medical evidence was required.

• Return-to-work meetings.

• Payroll adjustments.

👉 To note

Keeping sickness records up to date helps ensure occupational sick pay is applied consistently and reduces the likelihood of payroll errors and discrepancies.

Automating occupational sick pay with HR and payroll software

As businesses grow, managing occupational sick pay manually can become increasingly time-consuming. Integrated HR and payroll software helps automate routine tasks, maintain accurate employee records and ensure payroll reflects company sick pay policies.

From recording sickness absence and applying company sick pay rules to automatically updating payroll calculations and employee records, PayFit helps reduce manual administration while improving payroll accuracy and visibility across your workforce.

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