Glossary definition

What is occupational sick pay (OSP)?

6 min read Share

Ever had the question “what is OSP?” and what it means in relation to sick pay for your employees?

Imagine Jane, your “employee of the month”, has to take a lengthy leave of absence due to a serious illness. Unless you had a crystal ball, there’s no way you could have seen it coming.

Now, instead of just giving Jane statutory sick pay (SSP), which is the bare minimum allowance, having an occupational sick pay (OSP) policy in place would mean that she would keep getting her normal salary. That way, Jane wouldn’t be stressing about her finances taking a hit – on top of everything else.

Although SSP offers some financial support when sickness strikes, many employers are seeing the value of OSP. It’s a more generous type of sick pay, usually laid down in contracts and company policies, and it shows your team that they have your support when they’re feeling under the weather.

In this article, we’ll break down what OSP actually is, how it works, why it’s a smart move for your business and how HR software can make managing it a whole lot easier.

Here’s what we cover:

What is occupational sick pay and how does it work?

Remember Jane? If she’s off work sick, she might be entitled to either OSP or SSP.

OSP is basically the sick pay her company agrees to give her – it’s written into her contract or company policy, so you might also hear it called contractual sick pay or company sick pay.

Most of the time, OSP includes the basic SSP amount and then tops it up, so Jane usually ends up getting more than the legal minimum.

SSP, on the other hand, is the government-set minimum that employers have to pay sick employees who qualify. It’s considered the safety net, while OSP is a step up.

Who is entitled to occupational sick pay?

When it comes to sick pay, there’s a big difference between SSP and OSP.

• SSP: this is set by the government, so the rules on who gets it and how much they receive are pretty much fixed.
• OSP: this is up to the employer, which means companies can decide their own rules, such as who qualifies and how long someone needs to have worked there to be eligible.

For example, your business might choose to reserve OSP for full-time staff or employees who have been with the company for a certain number of months or years. It’s more flexible, but also varies from one employer to the next.

When does occupational sick pay start and how much is it?

Most companies that offer sick pay ask employees to let them know they’re off sick – usually on the first day they’re not feeling well.

At first, it’s usually enough to just self-certify (basically, tell their employer they’re sick). But if they’re off for more than seven days in a row, they’ll need a doctor’s note – also known as a fit note.

How much an employee pays in OSP really comes down to what’s been agreed in their employment contract.

As long as what you’re offering is at least equal to the SSP rate, it’s up to you as the employer to decide how much to pay when someone’s off sick. You can be more generous than what’s written in the contract – but you can’t go below SSP, which is currently £118.75 a week and can be paid for up to 28 weeks.

Just like SSP, OSP counts as regular earnings, so it goes through payroll and gets taxed like normal income.

How long do you have to make occupational sick payments?

How long someone gets OSP for really depends on what’s laid out in their employment contract.

Usually, employers offer full pay for a certain number of weeks or months, then it might drop to half pay and, after that, it could move to unpaid leave if the person is still off.

Some companies set a fixed time for OSP, while others link it to how long the employee has been with the business. Either way, it’s got to cover at least 28 weeks of sick pay as the minimum.

Once OSP runs out, the employee might not get paid anymore – unless they still qualify for SSP or other benefits. In some cases, though, the employer might step in with a bit of extra help, such as letting them use up any leftover holiday or offering more flexible working options to ease them back in.

How does occupational sick pay show up on a payslip?

OSP shows up on a payslip in 3 main ways, each of which show how much an employee is paid while they’re off sick:

1. OSP is included as normal pay: if an employee is on full sick pay, their payslip might look the same as it always does – with their salary appearing under “basic pay” or “gross pay,” as if they weren’t off sick at all.

2. OSP as a separate line entry: there might be individual lines for SSP and OSP or a reduced basic pay amount if an employee is only getting some of their salary.

3. OSP adjustments or “offsets”: at first glance, an employee’s pay might look normal, but then it subtracts part of it with a negative line, such as an OSP offset, sick pay adjustment or SSP offset – so they know how much of their salary is covered by sick pay.

Then, it adds the SSP back and any OSP amounts to show where the money is coming from.

Here’s an example:

• Basic pay: £2,000.00
• SSP: £467.00
• SSP offset: -£467.00
• OSP: £2,000.00
• Total gross pay: £2,000.00

Why set up an occupational sick pay scheme?

An OSP scheme may not be a must-have, but here are three reasons why it’s a good move for employers.

1. Attractive to potential employees

Offering OSP is a great selling point to potential employees. They’re not only more likely to be attracted to employers who look after them during their hour of need, but they’re also more inclined to become more positive about their work environment, which translates to increased loyalty and longevity.

2. Reduce instances of employees working when ill

An OSP scheme can reduce “presenteeism”, which is when employees continue working despite being sick because they’re worried about being left out of pocket. If they know they will be paid while they’re unwell, they’re more likely to rest and recover than return to work before they’re ready.

3. Reduction in long-term absence

OSP can potentially lower long-term absence because it means employees can tackle more minor issues early, preventing them from becoming major health issues down the line.

How can HR software help to manage occupational sick pay?

HR software creates a one-stop-shop for all your employee information, whether it’s start dates, pay, working hours or history of sick leave.

With this information in one place, it’s easier to work out who’s eligible for OSP, how much they should receive and for how long.

HR software also removes the heavy lifting involved in manually calculations. It automatically works out SSP, OSP top-ups, pro-rata pay, contra payments and connects directly with payroll software, so there’s no double-handling of data.

And it ensures your sick pay policy is applied consistently and that it complies with SSP laws.

Final thoughts

Offering OSP is a great way to boost employee satisfaction and keep your people around for longer. But it does come with a few challenges.

To make it work smoothly, employers need to set out clear rules from the start. That means making sure employees know exactly how OSP works – ideally, during their onboarding or in the company’s absence policy.

Laying everything out upfront helps avoid confusion, keeps things fair, and lets your employees know what kind of sick pay they can expect – if they ever need it.