Employer sick pay

What it means

Employer sick pay is the payment a company makes to an employee for the first ten calendar days of temporary incapacity for work. It comes out of the company’s own money and nobody reimburses it.

It is neither wage compensation under the Labour Code nor sickness benefit: it has its own Act and is calculated from the daily assessment base, not from average earnings. A lower percentage applies to the first days, a higher one from the fourth.

Employer sick pay is not a wage for contribution purposes either: no social or health insurance contributions are due on it, so the company adds no employer contributions on top. Income tax, however, is withheld from it just as from wages, because it is employment income, and the employee will find it in the annual tax reconciliation too.

How it works in practice

From the eleventh day the Social Insurance Agency takes over and the company pays nothing further. Incapacity is recorded electronically today, so the employer sees the entry without a paper certificate from the doctor.

A collective agreement or the employment contract may raise the percentage, but only as far as the Act allows; it cannot be pushed below the statutory level. A sole trader has no employer: where sickness insurance is in place, sickness benefit runs from the first day and these ten days do not apply.

If the company suspects that an employee on sick leave is not keeping to the prescribed treatment regime, it can ask the Social Insurance Agency to carry out a check. A breach found by the check is a ground on which the employer may reduce or withhold the sick pay; we file the result with the payroll records so it is clear why the payment is lower.

What to watch out for

The ten days are calendar days, not working days. A payroll system set to working days pushes the end of the payment out by roughly four days: the company pays for a period the Social Insurance Agency already covers, nobody refunds it, and the employee draws sickness benefit for those same days as well.

Sick pay is paid on the regular payday like wages, not once the incapacity ends. A company that holds it back until the employee returns is in arrears, and the employee can claim default interest; in a labour inspection a late sick-pay payment is judged exactly like a late wage.