How to Properly Calculate Sick Pay in 2021

The formula is simple:

Sick Pay = Average Daily Wage x Number of Calendar Days of Illness x Percentage of Sick Pay

But to arrive at this formula, so much needs to be calculated, considered, and verified. So, let's break down the sick pay molecule into atoms ☺

What is the average daily wage?

This is the sum of an employee's earnings for the calculation period, on which the Unified Social Contribution (USC) was accrued, divided by the number of calendar days in the calculation period, as stated in clause 3 of Procedure 1266.

What types of payments are included in the calculation of the average daily wage?

All payments included in the Wage Fund: basic and additional wages, other incentive and compensatory payments on which USC is accrued.
All payments are included in the calculation in the month in which they were accrued.

Exclusions from the average daily wage

Payments not included in the wage fund are not included in the calculation of the average daily wage:

• sick pay
• maternity benefits
• one-time financial assistance
• voluntary health insurance.

If financial assistance is paid on a regular, monthly basis, then include such payment in the calculation.

How to account for a bonus in the average daily wage

A bonus is fully accounted for in the month in which it was accrued. We do not divide it into parts. Even if the month for which the bonus was accrued differs from the month in which it was accrued.
For example, a bonus for April was accrued in May. When calculating the average daily wage, we include such a bonus in May.
One-time bonuses are also included. Procedure 1266 does not provide for the exclusion of such bonuses from the calculation.
Annual bonuses are included in full, as a single amount in the month in which they were accrued.
The only exception: if an employee did not work a full calendar month for valid reasons, then such a month is excluded from the calculation. If a bonus was accrued in that month, it is also not included in the calculation.

On our YouTube channel "Biznesuy" you can watch an interesting video on the topic of electronic sick leave, and it will only take 5 minutes.

What is the calculation period?

This is the period for which the average daily wage is calculated for payment of temporary disability days. Generally, it is 12 calendar months.
The month in which the insured event occurred is not taken into account.

If an employee has worked less than 12 calendar months, all worked months are taken into account, except for the month in which the employee was sick.

Please note, if an employee is hired on the first working day of the month, but it is not the first calendar day, then this month is not included in the calculation period.

If less than 1 calendar month has been worked (from the first to the first day) – we include the number of calendar days worked: from the date of concluding the employment contract to the date of the insured event.

Which days are not included in the calculation period?

In clause 3 of Procedure 1266, the following days, not worked for valid reasons, are listed:

• temporary disability, meaning previous sick leave is not included
• maternity leave
• childcare leave until the child reaches three or six years of age
• leave without pay

How to calculate the average daily wage if an employee falls ill on the first working day

In such a case, there will be no calculation period. For the calculation, the tariff rate, i.e., the salary, is taken and divided by 30.44 – which is the average monthly number of calendar days.
If an employee works part-time – accordingly, only a portion of the salary is taken for the calculation.

Why is it necessary to know an employee's length of service?

General insurance length of service – for determining the percentage of the compensation amount.
Employment history for the last 12 calendar months preceding the month in which the employee fell ill – to know whether to apply limitations to the average daily wage.

How to find out an employee's general insurance length of service

On the PFI website, you can create a request through your personal account.
Select "Request for electronic documents", then in the menu choose "Certificate of employment and insurance length of service". Fill in the employee's data (Full Name, Tax ID) and sign the request with an EDS.
If necessary, this certificate can also be obtained in paper form. This can be done by the employee themselves, or by an authorized representative of the employer.

General insurance length of service and the amount of sick pay

The amount of sick pay directly depends on the number of years of insurance length of service:

• 50% of the average wage is paid if the insurance length of service is less than 3 years
• 60% - insurance length of service from 3 to 5 years
• 70% - insurance length of service from 5 to 8 years
• 100% - insurance length of service more than 8 years.

Also, 100% of the average wage, regardless of length of service, is paid to certain privileged categories. Law No. 1105 lists such beneficiaries (sub-clause 5, clause 1, article 24 of Law 1105).

Quarantine introduced its amendments to Article 24 of Law 1105, and clause 2 appeared, which concerns people fighting the coronavirus. More specifically, regarding the amount of sick pay for them: 50% regardless of length of service for those in medical institutions or self-isolation under medical supervision for no more than 14 days, except for medical workers, who, in such cases, are compensated 100% regardless of length of service.

If Covid-19 is confirmed while in self-isolation, a new sick leave is opened, which is paid as a general illness, meaning the length of service coefficient is taken into account.

Limitations on the average daily wage

If an employee has worked less than 6 calendar months in the last 12 calendar months, they are entitled to sick pay calculated from their salary, from which USC was paid, but not exceeding the amount of assistance calculated from the minimum wage.

The daily assistance amount is calculated as follows:

Minimum wage/30.44

That is, from January to November 2021 – no more than UAH 197.11/day, from December 2021 – UAH 213.53/day.

On the other hand, there is a maximum amount limitation.

If an employee's salary is UAH 120,000 per month, only UAH 90,000 will be included in the calculation for the period January-November 2021, and UAH 97,500 from December 2021.

This is because paragraph 2, clause 2 of Procedure 1266 states that the monthly amount of temporary disability benefits should not exceed the maximum amount of the unified social contribution base*.
*15 minimum wages

In conclusion – examples of sick pay calculation

Follow the link to find current examples of sick pay calculation.

If you have questions or need expert assistance from specialists in accounting, or are considering outsourcing payroll and HR management processes. 

Also read articles in our accounting blog about:

• how payroll outsourcing projects work in our company
• features of maternity benefits and insurance length of service in 2022
• algorithm of actions for documenting maternity leave and returning from it
• additional social leave for children
• transition to electronic employment records

Another short video about e-sick leave from UHY Prostor)