(Or: “When Someone’s Off Sick for a While, Payroll Doesn’t Get to Look Away”)
Long-term sickness absence is one of those situations where everyone is trying to do the right thing — but payroll quietly becomes the thing holding it all together.
An employee is unwell.
The business wants to be supportive.
HR is checking policies.
And payroll is sat there thinking:
“Right… what are we actually paying, for how long, and how do we report it correctly?”
Because while the employee may be off work, payroll obligations very much remain.
So let’s walk through how payroll works during long-term sickness absence, what needs to be paid (and when), how it’s reported, and how the April 2026 Employment Rights Act changes fit into all of this.
What Counts as Long-Term Sickness?
There’s no single legal definition, but in practice, long-term sickness usually means an employee has been off work for four weeks or more.
At this point, payroll typically moves beyond “just process SSP” and into:
- Tracking entitlement carefully
- Monitoring contractual sick pay
- Managing reporting to HMRC
- Coordinating closely with HR
This is where accuracy really matters.
Statutory Sick Pay (SSP): The Baseline
According to HMRC, Statutory Sick Pay applies where an employee:
- Is classed as an employee
- Meets the earnings threshold
- Has been off sick for four or more consecutive qualifying days
Key SSP points for payroll:
- SSP is payable for up to 28 weeks
- It is paid through payroll
- It is subject to PAYE and National Insurance
- It must be reported via RTI
Payroll must actively track SSP entitlement. Once the 28-week limit is reached, SSP must stop — it does not continue automatically.
Contractual Sick Pay: Follow the Contract, Not Assumptions
Many employers offer contractual sick pay on top of SSP.
This might include:
- Full pay for a set period
- Reduced pay after a certain number of weeks
- SSP topped up to normal pay
Payroll must apply:
- The employment contract
- Any sickness or absence policy
- Any written agreements in place
One of the most common payroll problems we see is contractual sick pay ending — but payroll not being told in time. That’s how overpayments happen, and they’re rarely easy to recover.
Tax, National Insurance and Deductions Still Apply
Sick pay is still earnings.
Payroll must continue to:
- Deduct Income Tax
- Deduct National Insurance where thresholds are met
- Apply student loan deductions if applicable
Lower pay may reduce deductions, but payroll must still calculate and report everything accurately.
Being sick does not remove someone from PAYE.
When SSP Ends: What Payroll Must Do
When SSP entitlement runs out:
- SSP payments must stop
- Payroll must issue form SSP1 to the employee
- Accurate RTI reporting must continue
SSP1 allows the employee to explore other benefits, but payroll’s responsibility is to stop SSP at the right time and provide the correct documentation.
RTI Reporting During Long-Term Absence
HMRC reporting remains critical during sickness absence.
- If an employee is paid anything, they must be included on the FPS
- If an employee receives no pay, they are not included on the FPS
However:
- If no employees are paid in an entire tax month, payroll must submit an EPS
- For long absences (three months or more), payroll may need to use the irregular payment indicator so HMRC doesn’t assume the employee has left
This small detail prevents incorrect tax codes and unnecessary HMRC queries.
Pensions During Long-Term Sickness
Pension treatment depends on pay levels and scheme rules.
- If contractual sick pay continues, pension deductions usually continue
- If only SSP is paid, pension deductions may still apply depending on earnings
- If no pay is received, contributions may pause — but records must remain accurate
Payroll must follow scheme rules and keep pension records up to date.
Employment Rights and the April 2026 Changes
According to Acas, sickness absence does not remove employment rights.
From April 2026, the Employment Rights Act reforms introduce:
- Stronger day-one employment protections
- Earlier access to certain statutory rights
- Greater emphasis on fairness, transparency, and process
While SSP rules themselves are not changing, these reforms mean:
- Employees may reach long-term sickness stages much earlier in employment
- Employers must be more careful about decisions linked to absence
- Payroll must ensure any changes to pay are contractual, transparent, and properly authorised
Your payroll process must align tightly with HR decisions — guessing or quietly adjusting pay is no longer safe.
Common Payroll Mistakes During Long-Term Sickness
- Overpaying after contractual sick pay ends
- Forgetting SSP stops at 28 weeks
- Missing EPS submissions
- Not using the irregular payment indicator
- Making pay changes without clear agreement
Most of these errors are accidental — but HMRC consequences are not.
The Love Payroll Bit
At Love Payroll Limited, long-term sickness payroll is handled carefully and correctly.
We:
- Track SSP accurately
- Apply contractual sick pay properly
- Manage RTI reporting
- Handle pension implications
- Support employers through absence changes calmly
Because when someone is unwell, payroll should be accurate — not another source of stress.
Final Thought
Long-term sickness absence isn’t just an HR issue.
It’s a payroll process that requires accuracy, timing, and care — especially as employment protections strengthen in 2026.
Handled properly, payroll supports the employee and protects the business.
Handled badly, it creates overpayments, disputes, and HMRC problems.
Payroll may not fix everything — but it should never make a difficult situation worse.
