Pension Contributions and Sick Pay

Monday 23 July 2018

NW Brown often get asked what happens to pension contributions when an employee is in receipt of statutory sick pay (SSP).

SSP applies to employees with earnings of at least the NI lower earnings limit, which is 116 a week in 2018/19. A full week's SSP is 92.05.

Automatic enrolment legislation requires SSP to be treated as part of qualifying earnings, or as part of basic pay under set 1, 2 or 3 certification. These rules apply to both automatic enrolment schemes and qualifying workplace pension schemes (QWPSs) using contractual enrolment.

During sick leave, contributions paid by the employer and employee are based on the employee's actual earnings. It is important that contracts of employment make it clear as to how pension contributions are treated in the event of being in receipt of sick pay. Unless the contract of employment or the scheme rules offer more generous terms, both employer and employee contributions decrease if sick pay is less than normal pay.

If salary exchange is used, employers must follow the varied contract of employment set up at the outset of salary exchange and maintain the agreed level of pension contributions during any form of paid sick leave. Employer contributions will be based on the employee's actual earnings during sick leave. SSP must be paid in full in cash and cannot be reduced by the salary exchange agreement.

For more information, please call 01223 720209.

NW Brown Employee Benefits is a trading name of NW Brown & Company Limited. NW Brown & Company Limited is authorised and regulated by the Financial Condudct Authority (191123).

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