Occupational Sick Pay: What You Need to Know

When employees fall ill, confusion around pay can add unnecessary stress for both staff and HR teams. Inconsistent policies and unclear entitlements can lead to frustration, low morale, and even disputes.

That’s why understanding Occupational Sick Pay (OSP) and company sick pay during a period of sick leave is crucial. Unlike Statutory Sick Pay (SSP), OSP offers enhanced support during illness, helping businesses care for their people while maintaining trust and productivity.

In this blog, we’ll break down what OSP is, who qualifies, how it’s typically calculated, and how HR teams can manage it effectively and fairly.

What Is Occupational Sick Pay?

So what does what does OSP mean on payslip? Occupational Sick Pay UK (OSP) is an employer-provided benefit that offers greater financial support than the basic Statutory Sick Pay (SSP) during periods of sickness absence, as outlined in the company policy, when an employee is off work due to illness. It’s a basic right designed to reduce financial stress during recovery and promote a more supportive workplace during the period of sickness.

Here’s a quick breakdown of what OSP involves:

• Enhanced Income Support: OSP can provide full or partial pay for a set period, depending on the employer’s policy.
• Not Legally Required: Unlike SSP, offering OSP is optional for employers, but many include it as part of competitive benefits packages.
• Policy-Dependent: Terms vary widely between organisations and are usually detailed in employment contracts or staff handbooks.
• Based on Service or Role: Eligibility and pay levels often depend on factors like length of service, position, or contract type.
• Separate from SSP: OSP may be paid in addition to SSP or instead of it, depending on how the policy is structured.

Understanding your OSP policy helps ensure you’re prepared if illness strikes—and helps HR teams manage absence fairly and in line with company standards.

What Is the Difference Between OSP and Statutory Sick Pay (SSP)?

While both OSP on payslip and SSP provide income during periods of absence due to sick leave, they differ in who provides them, how much is paid, and how flexible the terms are. In addition, individuals may consider Universal Credit or Employment and Support Allowance as options for additional financial assistance during these times.

Here’s a clear comparison table between Occupational Sick Pay (OSP) and Statutory Sick Pay (SSP):

Who Qualifies for Occupational Sick Pay in the UK?

Qualification for Occupational Sick Pay in the UK depends on several factors, including your employment contract, length of service, and employer policies. Typically, employees must meet specific criteria set by their employer, such as having completed a qualifying period of continuous employment.

Here are common factors that influence OSP eligibility:

• Length of Service: Many employers require a minimum period of continuous employment, such as three or six months, before OSP becomes available.
• Contract Terms: OSP eligibility is often outlined in your employment contract, so it’s important to review the agreed terms from your hiring date.
• Medical Evidence: Employers typically require a GP-issued fit note (often called a ‘sick note’) if you’re absent for more than a specified period, usually seven calendar days.
• Notification Requirements: To qualify for OSP, you’re generally expected to notify your employer of your illness within a set period, often within the first one or two days of absence.
• Policy Limits: Many employers place a cap on the amount of OSP you can receive within a 12-month period, limiting the total number of paid sick days.

Eligibility criteria can vary widely, so it’s essential to review your employer’s specific policy. If in doubt, speak to your HR department or check your contract to confirm what you’re entitled to.

Also read: Statutory Paternity Pay: What New Dads Need to Know

How Is Occupational Sick Pay (OSP) Calculated?

There’s no standard formula for calculating OSP in the UK, each employer sets their own rules. However, most OSP schemes follow a structured approach based on factors like salary, length of service, and length of time of absence.

Here’s how it’s typically calculated:

• Percentage of Salary: Many employers offer 100% of your usual salary for a fixed period (e.g., 4–12 weeks), followed by reduced pay (e.g., 50%) for a further period.
• Length of Service: The longer you’ve been with the company, the more generous the OSP package may be. Some employers offer a tiered system, longer service unlocks more weeks of full or half pay.
• Inclusion of SSP: Some OSP schemes include Statutory Sick Pay within the total amount paid, while others pay it on top, based on the terms outlined in an employee’s contract. Check your employer’s policy for clarity.
• Capped Entitlement: Employers may set a cap on the total amount or duration of OSP you can receive in a given year or employment period.
• Pro-Rata for Part-Time Staff: If you work part-time or irregular hours, your OSP is usually calculated on a pro-rata basis according to your contracted hours.

To know exactly how your OSP is calculated, refer to your employment contract or speak with HR. Clear documentation helps avoid confusion and ensures you get what you’re entitled to.

Also read: Electronic Payslips: What Employers Need to Know

7 Tips for Efficient OSP Management in HR

Managing Occupational Sick Pay (OSP) and the sick pay policy fairly and consistently is essential for avoiding claims of discrimination, as well as for maintaining trust, compliance, and operational efficiency. HR teams play a key role in ensuring the policy is well-documented, clearly communicated, and promotes clear communication aligned with business needs.

Here are some practical tips for managing OSP effectively:

1. Create a Clear, Written Policy

Document your OSP rules in employee handbooks or contracts. Be specific about eligibility, pay structure, required documentation, and notice periods.

2. Align with Employment Law

Ensure your OSP policy complements statutory requirements like SSP and adheres to the current UK employment legislation. It’s a good idea to ensure compliance during this process.

3. Train Line Managers

Make sure supervisors understand the OSP policy and know how to handle sick leave conversations, documentation, and escalation regarding mental health problems.

4. Train Line Managers

Make sure supervisors understand the OSP policy and know how to handle sick leave conversations, documentation, and escalation.

5. Review Policies Regularly

Regularly reviewing and updating your OSP policy ensures it stays aligned with current employment laws, evolving business needs, and employee expectations, helping maintain compliance, fairness, and workplace trust.

6. Promote Transparency

Communicate the policy clearly during onboarding and make it easy for employees to access and understand the rules, possibly by integrating payroll management software to streamline processes.

7. Monitor Trends and Costs

Track patterns in sick leave to identify potential issues like burnout, and use data to inform workplace health and wellbeing strategies.

By managing OSP strategically, HR teams can support employee well-being while keeping the process fair, efficient, and legally compliant.

Also read: Know Your Statutory Sick Pay Rights: How It Works in the UK

How Direct Payroll Services Can Simplify Payroll and Support Your Team?

Direct Payroll Services takes the pressure off your team by delivering accurate, on-time payroll, full HMRC compliance, and complete transparency—so you can stay focused on growth, not grappling with spreadsheets.

Why Choose Direct Payroll Services?

• End-to-End Payroll Management: From payslips and pensions to deductions and reporting, we handle every detail with accuracy and care.
• HMRC-Compliant & RTI-Ready: We stay ahead of the latest UK payroll regulations so you don’t have to. Fully compliant, always.
• Scalable to Your Business: Whether you’re just starting out or expanding fast, our flexible solutions grow with you.
• Dedicated Human Support: No bots, no runarounds, just real experts who understand payroll and your business.
• Smarter Payroll Tech: Our integrated platform automates tasks, reduces errors, and saves up to 80% of your admin time.

Let us take payroll off your plate, permanently. Partner with Direct Payroll Services. Get in touch today for an instant quote.

Conclusion

Understanding Occupational Sick Pay (OSP) is essential for both employees and HR professionals to ensure fair treatment and financial stability during periods of illness. Unlike Statutory Sick Pay (SSP), OSP offers enhanced support based on your employer’s policy, often providing greater income security.

By knowing your entitlements, reviewing your employment contract, and maintaining open communication with HR, you can navigate sick leave more confidently. For HR teams, managing OSP effectively promotes transparency, legal compliance, and employee trust.

Whether you’re planning policies or taking time to recover, a clear understanding of OSP helps everyone stay informed and supported throughout the process.

Frequently Asked Questions

What is the typical duration for OSP payments?

OSP payments usually go on for a set number of weeks or months. At first, you will get full pay, and then it may change to a period of half pay. Sick pay is based on the terms set out in your employment contract. The period of incapacity and the length of service, along with the rules in the policy, can also play a part.

Is there a cap on the amount of OSP an employee can receive?

Sick pay limits are set by your employer, not the government, and are usually outlined in your contract. There may be a waiting period, but payments are often higher than Statutory Sick Pay (SSP).

How does long-term illness affect OSP?

For long-term or recurring health issues, OSP may be reduced or stopped, depending on company policy. Employers may request a fit note and offer reasonable adjustments to support your return to work if you are managing a mental health condition.

What are considered excessive sick days?

Excessive sick days are typically those that significantly exceed the company’s average or policy limits, often raising concerns about abuse or underlying health issues. The exact threshold varies by employer and industry.

How many absences are too many for work?

Too many absences depend on company policy, but generally, frequent or unplanned absences that disrupt operations, such as more than 5–7 instances a year, may be considered excessive in terms of absence management. Consistent patterns often trigger reviews or interventions.