There is a little-known, but important, rule that applies to employees who are serving their notice whilst also being off sick.
Most employers would assume that an employee who is working their notice, but is then off sick, would receive either Statutory Sick Pay (SSP) or contractual sick pay, depending on their contract and eligibility under law.
However, sections 87, 88 and 89 of the Employment Rights Act 1996 operate to require the employer, in some circumstances, to pay “normal” pay to employees who are ready and willing to work out their notice but unable to do so due to sickness or injury.
This applies where the contractual notice period is either the same as, or less than, a week more than, the statutory minimum notice period (which is one week for each year of employment up to a maximum of 12 weeks).
The law, therefore, provides the following:
If an employee has been dismissed or made redundant
An employee is entitled to their full normal pay if their contractual notice is:
An employee will not be entitled to their full normal pay if their contractual notice is longer than statutory notice by one week or more.
They are only entitled to the appropriate pay for the reason they are off sick.
Therefore, where an employee’s notice period is more than the statutory minimum, and that employee has, for example, exhausted their entitlement to SSP, then they will not be entitled to any pay during their notice period.
However, if their contractual notice period is less than this, they will be entitled to their normal pay.
When an employee resigns, the employer needs to look at the contract to see what their notice period for dismissal would be. It’s really important to remember that, even though they are resigning, their notice pay rights depend on whether their dismissal notice period is statutory or contractual.
So, if their contract entitles them to normal statutory notice period from their employer (or less than a week more than this), then they will be entitled to one week’s full normal pay if they’re off work during their notice period. Take note that their contractual notice period may be longer than a week, but they are only entitled to pay for the statutory week period. For any remaining weeks of notice, they’re only entitled to the type of pay for the reason they're off, so if they are off sick, their pay will be whatever their sick pay entitlement is.
In this instance, the employee will only be entitled to be paid for the reason they're off during their notice period, for example, statutory sick pay (SSP) if they're off sick, for the entire period, regardless of whether they have been dismissed or are resigning.
The question arises over whether employers should increase all their notice periods for all employees, so they are all at least a week over the statutory minimum.
Whilst this is certainly possible, arguably the employer will likely end up more out of pocket by increasing all employees’ notice periods, and thus having to pay out at least a week’s extra on every employee they employ, simply to avoid having to pay full pay to a very limited number of employees who may be on sick leave during their notice period. The employer may, in fact, never have a situation where an employee is off sick during their notice and is unlikely to have many such employees. To avoid the possibility, the employer would need to increase all notice periods across the board, which is unlikely to be considered worth it.
Remember that when dismissing a long-term sick employee, it is very likely that the employee will be entitled to pay during their notice period at their normal pay, to avoid an unpleasant surprise later down the line. The employer should also remember that accrued, unpaid holiday pay will also be payable. The employer can consider discussing with the employee that they take some or all of this during their sick leave. Bear in mind, however, the employer cannot insist on this if the employee does not wish to do so.