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How to calculate statutory sick pay for zero hours workers

Zero hour workers will be entitled to the same Statutory Sick Pay (SSP) as employees if they reach the Lower Earnings Limit and earn at least £123 (before tax) per week (the 'threshold'). Zero hour workers' earnings are likely to fluctuate. Therefore, employers will need to work out if the worker's Average Weekly Earnings (AWE) in a 'Relevant Period' will satisfy the threshold before they are required to pay SSP.
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The Relevant Period (RP) is a period of time that is long enough to ensure that there is a fair representation of the worker's average earnings.

First, employers must identify the end date of the RP as this determines when the RP begins. This is used to calculate SSP for zero hour workers.

The end date of the RP is the last normal payday before the first complete day of sickness.

To work out the start date of the RP, employers must select a date no less than 8 weeks before the end date. The start date is the day after the last normal payday, with that payday being at least 8 weeks prior to the end date. The RP must also be a full pay period.

For example, If your worker's first full day of sickness is 21 January 2017, the RP for a monthly or weekly salary will be:

Salary payment frequency

Last payday before the first day of sickness

RP start date
(the day after the last payday at least 8 weeks before) 

RP

Calculation for AWE

Weekly 

(eg every Friday)

13 January 2017

18 November 2016

19 November 2016 to 13 January 2017

Total earnings for RP / 8 weeks = AWE

Monthly 

(eg last day of the month)

31 December 2016

31 October 2016

1 November 2016 to 31 December 2016

Total earnings for RP / number of months in the year / number of weeks in the year = AWE

(Total earnings for RP / 2 x 12 / 52 = AWE)

If the AWE is over the threshold, the employer will need to provide SSP. If the AWE does not reach the threshold, then the employer will not have to pay SSP.

Example A

  • John has worked for Steve for 2 years on a zero hours contract paid weekly on a Thursday
  • John falls ill on 27 November 2017 and notifies Steve on the same day

Before Steve agrees to make any SSP payment to John, he needs to check that John's AWE meets the threshold. The first step is to identify the RP:

  • because John's first day of sickness is a Monday, the last day of the RP is the last payday (ie Thursday 23 November 2017)
  • the start of the RP is the day after the payday at least 8 weeks before the last pay date (ie 29 September 2017)
  • therefore, the RP is from 29 September to 23 November

Now that Steve knows the RP, he needs to calculate John's AWE. Steven knows that John was paid £1,050 for hours worked in the RP. To calculate John's AWE, Steve must divide £1,050 by 8 weeks:

£1,050 / 8 = £131.25

Therefore, John's AWE is £131.25 which is above the threshold, so Steve is required to pay SSP.

Example B

  • Karen has worked for Matt for 6 months on a zero hours contract paid monthly on the 15th day of the month
  • Karen falls ill on 20 November 2017 and notifies Matt on the same day

To check that Karen's AWE meets the threshold, Matt needs to identify the RP:

  • the last day of the RP is 15 November 2017 (the last payday prior to falling ill)
  • the start of the RP is 16 September 2017 (the day after the payday at least 8 weeks prior to the last payday)
  • therefore, the RP is from 16 September to 15 November.

Now that Matt knows the RP, he needs to calculate Karen's AWE. Karen was paid £850 for hours worked in the RP. To calculate Karen's AWE, Matt must divide £850 by the number of months in the RP (2 months), multiply that number by 12 to find the annual earnings, and then divide that amount by the number of weeks in a year (52 weeks):

£850 / 2 = £425
£425 x 12 = £5,100
£5,100 / 52 = £98.08

Therefore, Karen's AWE is £98.08 which is below the threshold, so there is no entitlement to SSP.

Workers who have not had 8 weeks of earnings yet

Workers who fall ill prior to 8 weeks of continuous service may still be entitled to SSP. Employers will need to calculate their AWE in the same way as above, but the RP will be the total amount of employment prior to the first day of sickness.

Period of employment pre-sickness

RP

Calculation of AWE

Exact number of weeks

(eg 5 weeks pay prior to sickness) 

5 weeks

Total earnings / number of months = AWE

Incomplete number of weeks 

(eg 2 weeks and 3 days prior to sickness)

17 days

Total earnings / number of days worked x days in a calendar week = AWE

(Total earnings / 17 x 7 = AWE) 

Example C

  • Charley has been working for Lindsay for 3 weeks and 3 days on a zero hour contract paid weekly on a Wednesday
  • Charley falls ill on 21 November 2017 and notifies Lindsay on the same day

Because Charley has not been working for 8 weeks, the RP will be 24 days. The calculation of days will always be 7 days per week regardless of the actual number of days worked. Charley is going to be paid £465 for the days she has worked.

Therefore, Charley's AWE is the total amount of earnings divided by the total number of days worked, multiplied by 7:

£465 / 21 = £22.14

£22.14 x 7 = £155

Therefore, Charley's AWE is £155 which is above the threshold, meaning she will be entitled to SSP.

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