SPM10605 - Statutory Sick Pay (SSP) - Calculating average weekly earnings

Earnings for SSP entitlement

Employees are only paid SSP if their AWE in the set period immediately before the start of the PIW or series of linked PIWs are above the LEL.

When calculating an employee's AWE, all earnings paid in the set period must be included even if they relate to periods outside the set period, for example, holiday pay which is paid on a pay day in the set period but is for a past or forward period. If, on any pay day, the employee was not due any pay, blank weeks are included as zero pay. The only exception is if there is a mistimed payment.

Mistimed Payments

A mistimed payment occurs when the date of the actual payment of earnings is early or late due, for example, to a holiday period which stops the wages being paid on their normal date.

If there is a contractual payday, then the earnings are treated as if they were paid on the contractual date. An example of this would be if a monthly payroll is paid early because of Christmas, see SPM20820.

Alternatively, if there is no contractual pay day, the divisor used to calculate the AWE should be adjusted to reflect the number of weeks’ pay which have been paid in the set period. For example, if nine weeks’ wages have been paid in an eight week set period because of a holiday, the divisor should be nine not eight.

This only applies to regular payments of earnings which are being paid on a day other than their normal pay date. It does not include other payments made within the set period such as a bonus; commission payments; adjustments to earnings for an earlier period or arrears of pay.

Earnings for SSP purposes are defined by regulation 17(2) of the Statutory Sick Pay (General) Regulations 1982 as:

‘any remuneration or profit derived from employment’, except where specifically excluded by regulations. Any payments are included which are liable for Class 1 NICs, or would be if they were high enough - apart from monies drawn by directors in anticipation of fees which are only included once they have been voted."

Payments not included in “earnings”

The following earnings or payments are not included when calculating earnings for SSP purposes.

• earnings which attract Class 1A NICs, paid on company benefits such as cars
• earnings which attract Class 1B NICs, paid on PAYE Settlement Agreements
• Tax Credits