How is SSP calculated under the new rules?

From 6 April 2026, Statutory Sick Pay in the United Kingdom follows a fundamentally different calculation method. SSP is now calculated at 80% of Average Weekly Earnings capped at £123.25 per week, replacing the previous flat-rate system. For payroll teams managing UK employees, this shift means the SSP amount varies by individual rather than applying a single weekly figure across the workforce.

The change creates immediate forecasting challenges, with government estimates showing the SSP reforms will add £450 million annually in business costs. An employee earning £35,000 annually will hit the cap and receive £123.25 weekly, while a part-time worker earning £150 per week receives £120 in SSP. Variable-hours employees add another layer of complexity because their AWE fluctuates based on recent pay periods. Getting the maths wrong exposes employers to HMRC scrutiny and underpayment claims.

This guide walks through the actual calculation methodology with worked examples for full-time, part-time, and variable-hours employees. You'll find the specific formulas, reference period rules, and common mistakes that trip up even experienced payroll professionals.

Quick Facts: SSP Calculation 2026 UK

Weekly SSP equals 80% of AWE or £123.25, whichever is lower, so the formula is min(0.80 × AWE, £123.25). The SSP cap binds at an AWE of £154.06 per week because £123.25 divided by 0.80 equals £154.0625. Employees earning above £154.06 weekly receive the same £123.25 regardless of actual salary. The 8-week reference period ends on the last normal payday before the first day of sickness. SSP is payable from day one of sickness absence, with no waiting days under the 2026 rules. Linked sickness absences separated by 56 days or fewer are treated as connected for SSP continuity purposes. New starters with less than 8 weeks of pay history require AWE calculation based on available earnings data only.

What is the new SSP formula for April 2026?

The SSP calculation 2026 UK methodology uses a two-part formula: calculate 80% of the employee's AWE, then compare it against the £123.25 weekly cap. The employee receives whichever amount is lower. This means weekly SSP equals the minimum of (0.80 × AWE) or £123.25.

The £154.06 earnings threshold represents the break-even point where 80% of AWE exactly equals the cap. Any employee with AWE at or above £154.06 per week receives the full £123.25 weekly SSP. Employees below this threshold receive exactly 80% of their AWE, which will be less than £123.25.

For daily SSP calculations, divide the weekly amount by the number of qualifying days in the employee's working week. An employee with five qualifying days and weekly SSP of £123.25 receives £24.65 per sick day. An employee with three qualifying days and the same weekly entitlement receives £41.08 per sick day. The daily rate depends entirely on the qualifying-day count, not a standard five-day assumption.

How is Average Weekly Earnings calculated for SSP?

Average Weekly Earnings for SSP purposes uses an 8-week reference period ending on the last normal payday before the first day of sickness. You divide total eligible gross earnings paid during this period by the number of weeks to arrive at AWE. The calculation captures what was actually paid, not what was contractually owed.

Eligible earnings include basic salary, overtime payments, commission, bonuses paid during the reference period, and shift premiums. Salary sacrifice amounts reduce gross pay and therefore reduce AWE. Expenses reimbursements and benefits in kind typically don't count as earnings for AWE purposes, though the classification requires careful review against HMRC guidance.

What counts as earnings for AWE?

Gross pay before tax and National Insurance deductions forms the basis. Regular overtime worked during the reference period counts even if it's discretionary. Commission and performance bonuses paid within the 8-week window are included regardless of when they were earned. Holiday pay received during the reference period counts toward AWE.

Statutory payments like previous SSP, Statutory Maternity Pay, or Statutory Paternity Pay received during the reference period are excluded from the AWE calculation. Redundancy payments and termination payments don't count. The distinction matters because including excluded payments inflates AWE and potentially overpays SSP.

How does pay frequency affect the reference period?

The 8-week reference period anchors to normal paydays, not calendar weeks. For monthly-paid employees, the reference period typically spans two complete pay periods. For weekly-paid employees, it covers exactly eight payslips. Fortnightly pay creates a four-payday reference window.

This pay-frequency dependency means the same calendar period can produce different AWE figures depending on when paydays fall. A monthly-paid employee whose payday lands on the 25th has a different reference period than one paid on the last day of each month, even if both fall sick on the same date.

Worked example: Full-time employee earning £35,000

Consider a full-time employee with an annual salary of £35,000 and five qualifying days per week. Their implied AWE is approximately £673.08, calculated by dividing £35,000 by 52 weeks. Applying the 80% calculation gives £538.46 weekly.

Since £538.46 exceeds the £123.25 cap, this employee receives £123.25 per week in SSP. The cap binds for any employee earning more than approximately £8,011 annually, which covers the vast majority of full-time salaried workers.

For daily SSP, divide £123.25 by five qualifying days to get £24.65 per sick day. If this employee is sick for three days in a week, they receive £73.95 in SSP for that week. The calculation remains straightforward because the cap applies and the qualifying-day count is standard.

Worked example: Part-time employee earning £150 per week

A part-time employee earning £150 per week with three qualifying days falls below the cap threshold, a calculation that matters more given part-time workers had a 2.6% sickness absence rate in 2024 versus 1.9% for full-time workers. Their AWE of £150 multiplied by 80% equals £120 weekly SSP. Since £120 is less than £123.25, they receive the full 80% amount rather than the capped rate.

The daily SSP rate for this employee is £120 divided by three qualifying days, equalling £40 per sick day. This is actually higher than the daily rate for the full-time employee in the previous example because fewer qualifying days mean each day carries a larger portion of the weekly entitlement.

If this employee is sick for two of their three qualifying days, they receive £80 in SSP for that week. The part-time calculation demonstrates why qualifying-day counts matter more than headline weekly figures when forecasting actual SSP costs.

Worked example: Variable-hours employee with fluctuating pay

Variable-hours employees present the most complex SSP calculations because their AWE changes based on the specific 8-week reference period. Consider an employee whose weekly earnings over the past eight weeks were: £180, £220, £150, £200, £175, £190, £210, and £165.

Total earnings across the reference period equal £1,490. Dividing by eight weeks gives an AWE of £186.25. Since 80% of £186.25 equals £149, and £149 exceeds the £123.25 cap, this employee receives the capped weekly SSP of £123.25.

Had the reference period captured a slower period with lower overtime, the AWE might have fallen below £154.06, resulting in lower SSP. Teamed's analysis of variable-hours payroll teams shows that AWE volatility across employees creates significant forecasting challenges because the 8-week reference window can materially change the SSP amount when recent overtime, commission, or bonus payments fall inside or outside that window.

How do you calculate SSP for new starters with limited pay history?

New starters who fall sick before completing eight weeks of employment require AWE calculation based on available pay data. If an employee has received three weeks of pay before their first sick day, divide total earnings from those three payslips by three to calculate AWE.

This creates higher volatility and error risk. A new starter whose first few weeks included training bonuses or sign-on payments will have an artificially inflated AWE. Conversely, someone who started mid-pay-period may have a lower first payment that drags down their AWE.

Payroll teams should document the calculation methodology clearly for new starters. HMRC may query SSP payments where the reference period is shorter than eight weeks, and clear records demonstrating the calculation basis protect against compliance challenges.

What are linked periods of sickness and how does AWE carry forward?

Linked periods of sickness occur when separate sickness absences are separated by 56 days or fewer, a crucial rule given 44.8% of fit notes issued in England in Q1 2025-26 were for 5 weeks or longer. Under the 2026 rules, linked absences can be treated as a single Period of Incapacity for Work for SSP purposes. This affects both the 28-week maximum SSP duration and whether you recalculate AWE.

When absences are linked, the AWE from the first absence typically carries forward rather than requiring recalculation. This matters more under the new rules because AWE directly determines SSP amounts. An employee whose earnings increased between absences might receive lower SSP on a linked absence than they would on a fresh, unlinked period.

When should you recalculate AWE versus carry forward?

Recalculate AWE when the gap between absences exceeds 56 days, creating a new, unlinked Period of Incapacity for Work. The new reference period anchors to the payday before the new absence, capturing more recent earnings data.

Carry forward the existing AWE when absences fall within 56 days of each other. The original calculation remains in effect even if the employee's pay has changed. This rule prevents gaming where employees might time absences to capture higher-earning reference periods.

For workforces with recurring short absences, Teamed recommends documenting linked-absence decisions systematically. The 56-day rule creates administrative complexity that compounds when multiple employees have intermittent sickness patterns.

How does transitional protection work for employees already on SSP?

Employees who were already receiving SSP before 6 April 2026 may qualify for transitional protection if the new AWE-based calculation would reduce their entitlement. The protection ensures these employees don't see their weekly SSP drop mid-absence due to the rule change.

Transitional protection applies only to the specific absence that spans the changeover date. Once that absence ends and a new, unlinked period begins, the new calculation rules apply in full. The protection doesn't create permanent entitlement to the old rate.

Payroll teams should identify any employees receiving SSP as of 5 April 2026 and compare their current weekly amount against what the new calculation would produce. Where the new calculation is lower, continue paying the higher amount until that specific absence ends or SSP entitlement exhausts.

What are the most common SSP calculation mistakes?

The most frequent error involves applying the £123.25 cap to daily SSP before pro-rating by qualifying days. This approach can underpay employees with fewer than five qualifying days or overpay those with non-standard patterns. Always calculate weekly SSP first, then divide by qualifying days.

Using gross pay instead of AWE creates systematic errors. Gross pay from a single recent payslip doesn't account for the 8-week averaging requirement. Overtime-heavy months inflate the figure while holiday periods deflate it. The reference period exists specifically to smooth these variations.

Forgetting to recalculate AWE for a new Period of Incapacity for Work after a gap exceeding 56 days means applying outdated earnings data. An employee whose pay increased significantly between absences would be underpaid if the old AWE carries forward incorrectly.

Rounding errors compound across large workforces. AWE should be calculated to at least two decimal places before applying the 80% multiplier. Rounding too early in the calculation chain produces small individual errors that aggregate into material discrepancies.

Is SSP based on gross or net pay?

SSP calculations use gross pay before tax and National Insurance deductions. The AWE figure represents what the employer paid, not what the employee received after deductions. This distinction matters because employees sometimes assume their take-home pay determines SSP.

However, SSP itself is subject to tax and National Insurance when paid. The £123.25 weekly cap or the 80% of AWE amount represents gross SSP. Employees receive less after deductions, just as they would with regular wages.

Salary sacrifice arrangements reduce gross pay and therefore reduce AWE. An employee who sacrifices £200 monthly toward pension contributions has a lower AWE than their headline salary suggests. This can push borderline employees below the £154.06 cap threshold, resulting in SSP below the maximum rate.

How much is SSP per day in 2026?

Daily SSP depends on two variables: the weekly SSP amount and the number of qualifying days. For an employee at the cap with five qualifying days, daily SSP is £24.65. For an employee at the cap with three qualifying days, daily SSP is £41.08.

Employees below the cap have variable daily rates based on their specific AWE. A part-time worker with AWE of £100 receives weekly SSP of £80 (80% of £100). With four qualifying days, their daily rate is £20. With two qualifying days, it's £40.

The practical payroll impact of the 80%-of-AWE rule is that the SSP cap applies to most full-time salaried employees whose weekly pay exceeds roughly £154.06. For salaried populations, SSP cost forecasting often reduces to counting eligible sick days and applying the capped rate. Variable-hours and part-time employees require individual AWE calculations.

Getting SSP calculations right across your UK workforce

The 2026 SSP changes shift complexity from a simple lookup to an individualised calculation. For companies managing UK employees alongside international teams, this adds another jurisdiction-specific requirement to an already complex compliance landscape.

The single most important control for accurate SSP forecasting involves identifying which employees bind at the cap using the £154.06 weekly AWE breakpoint. Employees above this level converge on the same weekly SSP cost of £123.25 regardless of their exact salary, simplifying budgeting for that population segment.

If you're managing UK payroll alongside employees in other countries, each jurisdiction brings its own statutory sick pay rules, reference periods, and calculation methodologies. Talk to an Expert at Teamed about how unified global employment operations can help you stay compliant across every market without building separate expertise for each country's requirements.