Employees can be expensive to run. If they are off sick, you lose their services while they are ill, yet still have to pay them.
The official statistics say flu hit epidemic levels this winter. The disruption caused by staff illness can be terrible. But might the tax system offer some help?
When an employee is off sick, the law requires that you continue to pay them, but it is up to you whether this is at their normal rate of pay, a percentage of this or just the Statutory Sick Pay (SSP) rate. Whatever arrangement you have with your employees, the tax system doesn’t offer to compensate you for paying your employee while they are not working. However, in some cases, you can claim a National Insurance (NI) credit.
Where you pay an employee sick pay, the tax system allows you to claim SSP compensation. You do this by reducing the PAYE tax and NI payment you send to the tax man at the end of the month in which you pay SSP. The compensation is worked out using the tax man’s Percentage Threshold Scheme (PTS), in the following way:
1. Add together the SSP you have paid to all your employees in the tax month concerned a tax month runs from the 6th to the 5th of the following month.
2. Add up the NI payable for the same tax month and work out 13% of this.
3. If the amount at point 1 is more than the amount at 2, you can reclaim the difference.
In our experience, company owners often overlook the fact that they, too, are within the SSP system. So when checking whether your firm qualifies for a compensation claim, ensure you take account of SSP entitlement for directors too.
The tax system also has a specific exemption, which means you can pay for your employees to have private medical check-ups without the cost counting as a taxable benefit-in-kind (BiK). These are intended to pick up early health problems, so steps for treatment can be taken.
You can also pay for your employees to have the flu jab, usually about £25 each and the tax man won’t treat this as a BiK. We think this is a relatively small price to pay if it saves losing one or more employees to the flu for several days. Even though tax and NI-free for your employees, your company can still claim the cost as a tax deduction against its profits. You must pay a doctor or pharmacy directly for the jab, as reimbursing an employee won’t qualify for the tax and NI exemption.