Breaking down the employment contract: incapacity terms

Breaking down the employment contract: incapacity terms


Author: Nick Vernon

Applies to: England, Wales and Scotland

In our fourth article in this series, we consider employment terms relating to incapacity and sick pay and issues that employers need to be aware of when drafting contractual provisions.


Any terms and conditions relating to incapacity for work due to sickness or injury (including any provision for sick pay) must be included in the statement of initial employment particulars which employers are required to give to employees within two months of the start of their employment under section 1 of the Employment Rights Act 1996.

This can either be within the employee's contract of employment or within another document which is reasonably accessible to the employee, such as a staff handbook.

In practice, employers will need to provide information about an employee's entitlement to sick pay as well as the employer's requirements for sickness absence reporting and evidencing the reason for the absence (including self-certification).

Sick pay

Perhaps surprisingly, there is no legal right for an employee to be paid anything more than Statutory Sick Pay ('SSP') - assuming they meet the qualifying requirements - when they are unable to work due to sickness.

SSP is paid at prescribed rates (currently £89.35 per week) and is payable for up to 28 weeks - but not for the first three days in any period of sick leave.

However, many employers do provide some form of enhanced contractual sick pay which goes over and above SSP, for example, paying employees their full pay, or a percentage of their full pay, for a specified amount of absence.

The contract of employment should therefore detail the employee's entitlement to sick pay, whether this be SSP only or something more generous.

Where enhanced sick pay is available, the contract should also clearly specify any conditions attached to this entitlement, for example, it might only be paid if the employee complies with the company's policy on reporting sickness absence and/or if they provide medical confirmation of their incapacity to work. Equally, an employer may choose to provide enhanced sick pay only after an employee has completed a probationary period or been employed for a certain amount of time.

Employees who are suspended on disciplinary grounds sometimes try to frustrate the process by 'going sick'. Employers may therefore wish to reserve the discretion not to pay company sick pay where the employee is going through a disciplinary process.

Reporting requirements

The employment contract (or sickness absence policy) should also detail how the employee must notify the employer of their sickness absence. This can include the person who they must notify, e.g. their line manager, as well as the manner in which they should do so.

For example, some employers do not accept a text message from an employee as a valid notification but instead require employees to call and speak to a specified person to inform them that they are unable to attend work and the reasons why.

If employees fail to follow the specified reporting policy, they may not be entitled to receive any enhanced sick pay and/or their absence could possibly be treated as being unauthorised.

It can be helpful to include a general obligation on the employee to co-operate fully in keeping the employer informed and maintaining an open dialogue about their absence and return to work.

Certification requirements

It is normal for the employment contract (or appropriate policy) to specify what the employee needs to produce and when in terms of providing evidence and/or reasons for their incapacity to work.

It is common for employees to be required to complete a self-certification form to cover the first seven days of their absence, after which they must provide a doctor's certificate (now referred to as a 'fit note') that states they are not fit for work and the reasons why.

The contract/policy should also make clear that employees are required to submit ongoing fit notes to cover the entirety of their period of absence.

Medical examinations

It is often useful for the contract of employment to state that the employer has the right to require the employee to attend an examination with an independent specialist doctor or occupational health expert.

Such an examination is likely to help the company gain a better understanding of the reasons for an employee's absence and when they might be able to return to work. Information from an independent specialist who has not previously been responsible for the employee may be seen as more reliable than information from an employee's GP.

It is usual practice that an employer would bear the cost of any such examination that is undertaken at their request.

Top tips for employers

Points for an employer to consider when drafting contractual provisions and policies on incapacity and sick pay include:

  • Consider whether any form of enhanced contractual sick pay will be offered. If so, specify the rate and duration of such pay, the conditions for payment and any circumstances in which it will not be paid. For example, if the employee does not comply with the condition to submit up-to-date fit notes.
  • If payment of contractual sick pay is discretionary, this should be clearly stated and employers should ensure that discretion is always exercised reasonably.
  • The contract should include a statement that any SSP received will count towards an employee's contractual sick pay entitlement (if relevant).
  • It is advisable to make clear that employees will not re-trigger an entitlement for contractual sick pay until they have achieved a certain level of sustained attendance at work following an initial period of absence. This can reduce the risk that an employee will try to 'manipulate' the enhanced sick pay benefit.
  • The contract (or policy) should clearly detail the employee's obligation to provide evidence of their incapacity which is satisfactory to the employer.
  • An employee who is taking a period of shared parental leave may be entitled to take suspend that leave and claim SSP if they become too ill to care for their child. Employers may wish to make it clear that any contractual sick pay will not be payable in those circumstances.
  • An employer may also wish to include provision for medical reports to be obtained if an employee has been absent for a specified period of time.
  • It is also advisable to set out the circumstances in which the employer will seek to recoup any contractual sick pay from an employee, for example if the employee receives any compensation as a result of the cause of their incapacity (due to, for example, an accident), the employer may want to seek to recover any sick pay paid during the absence.

Next time.

Next month we will be looking at bonus clauses and other, non-cash employee benefits.


This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

About the Author

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Nick Vernon


03700 86 4025

Nick is an associate in the employment team. Nick is experienced in advising clients on all aspects of employment law, including settlement agreements and termination, disciplinary and grievance issues, discrimination and redundancy & reorganisation.

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