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What Is Occupational Sick Pay? | Expert Guide

Preventing presenteeism

In 2022 the average worker took 5.7 days of sick leave, rising from 4.6 days in 2021. This can cost businesses in the UK billions annually, which can leave many business owners feeling despair at the future. However, many high-functioning organisations find the key to absence management in the form of Occupational Sick Pay (OSP).

You may have heard that an OSP Scheme means money is coming out of your pocket rather than the government with their adjacent statutory sick pay (SSP). However, it’s inherently disadvantageous to look at it as an expense you may or may not have to pay, but rather as an investment in your business.

In this article, we will go over occupation sick pay and its overall positive impact on employee morale, productivity, company culture, and its role in lowering absence.

What Is The Occupational Sick Pay Scheme?

Occupational sick pay is a contractual benefit offered by employers to staff during times of ill health. It is not at all mandatory, unlike statutory sick pay, and whether or not you’ll pay it is entirely at an employer’s discretion. Here are some of the key features of an OSP scheme.

  • Contractual Sick Pay – Outlined in the company handbook/employment contract should be a section on the organisation’s occupational sick pay policy. It is a contractual payment plan that has specific terms and conditions set by the employer.
  • Pay Types – Depending on your occupational sick pay scheme, there may be periods where either full pay or half pay is facilitated. But there are also graded and fixed amount schemes with their advantages and disadvantages (more on this later).
  • Duration of Payments – The length of the scheme depends entirely on the employer. Some have gone on for a few weeks, whereas some can go up to four months.
  • Probationary Period – Most employers will require an employee to work throughout their probationary period before allowing them to access their occupational sick pay benefits.


How Do You Qualify For OSP?

Speaking generally, here are the criteria that employees must meet to claim occupational sick pay:

  • Employed Status – They must be an employee of the company.
  • Employment Time – An employee typically has to pass the probationary period, but sometimes longer.
  • Qualifying Illness – An employee must be in a state of ill health.


Taxable Income

Occupational ill health payment is a form of taxable income, meaning an employee will pay income tax and national insurance contributions.

Pay Schemes for Sick

What Does OSP Cover?

Illnesses or injuries that fall under occupational ill health include:

  • Physical Health Issues – This can range from common colds to major illnesses like heart disease.
  • Mental Health Issues – Mental health is becoming more and more recognised by workplaces around the world, the chief amongst them being chronic stress and depression.
  • Surgery and Medical Procedures – Some surgeries are major, such as removing foreign objects or fixing bone issues, and can put an employee out of action for a long time.
  • Pregnancy-Related Issues – Some pregnancy-related issues, such as severe morning sickness or complications with pregnancy, can result in time off warranting OSP.


Optimising Your OSP Scheme

The following are steps any employer can take to ensure that your occupational sick pay policy is as effective in improving your workplace as possible.

Types Of Occupation Sick Pay Schemes

  1. Full Pay/Half Pay – Possibly the most common practice, here an employer ensures a set period where an employee’s full wage is given to them. For example, a month. From there on, however, an employee will be granted half of their wage. This is mainly to ensure fair treatment for both the company and the employee.
  2. Graded Schemes – In a graded scheme, an employer will pay employees full wages, but then begin to decrease the percentage over time. There is usually a lower limit, around half pay, where the grade stops.
  3. Fixed Amount Schemes – These schemes offer a fixed rate regardless of an employee’s income. For many, this can be seen as an effort to treat all employees fairly, but it also heavily simplifies administration.


Best Practices For Your OSP

There are no rules relating to how you administer your OSPs, as they are seen as a privilege, not a right. But if you are to have one, it’s important to ensure it works for your business.

  • Clear OSP Policy – Write out your OSP policy and ensure it’s in every handbook. Outline the eligibility criteria, payment terms and the process for claiming sick pay. Transparency helps cement employee expectations and opens a communication channel, ensuring everyone is on equal footing with where they stand. Ensure, also, that OSP counts as an employee’s taxable income.
  • Consistent Application – Ensure yours is a consistent sick pay policy. Avoid exceptions as much as possible, and when they are taken, ensure they cannot be interpreted as targeting any one group to evade discrimination claims.
  • Communication – Don’t shy away from the topic. When OSP is brought up, speak about it from the point of view that it’s there to ensure that employees’ finances are not held back by their health issues. Furthermore, take the opportunity to find out common points of confusion and clear them up. It also helps if you ensure employees know their rights and responsibilities.
  • Company Security – It’s important to reserve your right to adjust OSP. This is to reduce the likelihood of it being abused. Ensure that all employees know that OSP is there to look after the company as a whole, and abuse of its rules could have severe implications on both the policy and in some cases, job security for those who violate it. This can promote a shared sense amongst employees of OSP being a legitimate function that shouldn’t be abused.


Employee Rights And Responsibilities

Employees have certain rights and responsibilities when it comes to OSP, which makes sense. Once again, OSP is a privilege given by workplaces, although it’s slowly becoming the norm.

Claiming OSP

  • Notification – Employees must notify their employer of their impending sickness absence as soon as possible. Your occupational sick pay policy should have specific times in which a person must make their announcement, and it’s usually so that employers have time enough to make arrangements.
  • Proof of Ill Health – Even statutory sick pay requires forms of occupational health assessments, such as fit notes etc. As an employer giving out OSP, you can mandate that proof of ill health is similarly provided to you.


Overall, these two requirements give employers an advantage in knowing what’s happening in real-time outside of their office, but also possibly early enough that they can adjust and minimise the damage.

Responsibilities Of Employees

The following should also be outlined in your occupational sick pay policy.

  • Keep Employer Informed – Employees have a responsibility to ensure there are regular updates as to the sickness, if possible. How this communication is made is up to the individual, but normally, it’s person-to-person over the phone. It’s also important to note that if their absence is due to health issues relating to a previous diagnosis, the employer should know beforehand.
    • Note – It’s normal for employees to be defensive over their sickness due to being trapped between obligations and their ill health. This is why it’s important to communicate from the standpoint of assuming the employee is telling the truth, and showing support.
  • Return to Work when Fit – When fit, an employee should return as soon as they are medically able to. For easier transition into work, consider a phased return, having managers observe and gradually increase their workload.
    • Note – In cases of contagious illness, consider ensuring they’re not in contact with the workplace until their symptoms have completely disappeared. Vitality Health and Rand Europe estimated that the equivalent of 35 days per person per year is lost to presenteeism in the UK, which is the act of coming to work whilst sick with a contagious illness (usually the cold).
  • Cooperation with Return to Work plans – Employees should be expected to actively participate and cooperate with reasonable adjustments to their workplace/schedule to ensure they can be fully reinstated back into their positions.


Overall, OSP puts the power in the hands of the employer. With an increased amount of money released from the company, rather than the government, the company has increased entitlement to enquiring after their employees.

The Results Of An Effective Occupational Sick Pay Scheme

Occupational sick pay is a huge boon for employees and employers. The following are some ways in which an OPS will boost your workplace’s overall performance, coupled with studies to back it up.

Improving Workplace Health

Although it seems a bit strange that a policy made entirely to care for people who are experiencing illness would result in the prevention of illnesses altogether, this seems to be the case. Most places with an OPS installed tend to report better attendance than not. Don’t take our word for it, instead refer to the landmark study published in the Journal of Occupational and Environmental Medicine named the “Harvard Paid Sick Leave Study (2018).

The study involved data collected from over 140,000 employees in the USA, taken from various sectors, such as healthcare, administration etc. What they found was that all the employees who had access to an OPS also reported better health, and better satisfaction, and typically seemed more secure in their roles.

There are multiple reasons for this, but what many have surmised from studying the study, is that employees who had access to an OSP shared the understanding that abusing it would have ill effects on them, and the workplace. As a result, they keep their attendance high, take full precautions with personal health and save the OPS scheme for when they truly need it. Nonetheless, those without OPS may see no difference between being on statutory sick pay and not having a job, as the payments aren’t usually miles apart in terms of difference. And since having multiple sick days on days where, frankly, they could’ve made it in won’t result in damage to their OPS (since they don’t have one), there’s little incentive not to take it, aside from missing a day or two of pay.

Reducing Presenteeism And Its Costs

A study named “Presenteeism: Cost to Employers” by Circadian Analytics found that presenteeism, the act of coming to work sick, actually has negative effects on the workplace. It reduces workplace productivity, as not only is the employee working with less efficiency but teammates may have to handle some of their work, which also impacts workplace morale. It also suggests that presenteeism overall costs around 21% of the workplace’s productivity.

When an employee is sick, a lot of regulations are on their side, as well as their coworkers, and probably the wider public. It’s always best to adhere to them and their health before the company profits, and instead install an OPS.

Workplace Culture

Workplace culture is a huge factor in modern businesses. A 2021 study by Glassdoor, a site that reviews companies, found that employees with higher levels of goodwill toward a company reported satisfaction and increased productivity. A good workplace culture makes people feel lucky, and want to be there, as they feel as though they are not only caring for the company, but vice versa.

Advantages of a OSP Plan


Employees being sick is not a positive outcome for a business, but remember, it’s not positive for the employee either. Empathy and support are the best outcomes when it comes to being sick and away from work. With an OPS, you have more oversight and a heightened ability to document sickness, and it’s usually met with much less pushback than for employees’ statutory sick pay.

FAQ: What are the disadvantages of having an OSP?

We believe there are not many, as the alternatives are far worse. That being said, you should make two considerations:

  • Loss of Profit – It can be difficult to replace an employee, especially on short notice, depending on the sector. This can lead to lowered productivity, and the longer the sick pay runs, the more it will cost the company.
  • Universal Credit and Support Allowance – These two benefits exist to serve a wide variety of people, not just as a form of sick pay. But it’s there to give an income to those who need it, which are usually people who otherwise don’t have an income. OSP typically pays out so much that it’s taxable, which almost always disqualifies employees from these benefits.


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