Sick Pay

Sick Pay. A. These payments are defined as follows: 1. Sick pay is a payment made to or on behalf of an employee by an employer or a private third party (such as a union or insurance company) for sickness or accident disability. Sick pay is either wages or unearned income. 2. Payments under a Workers’ Compensation law are neither wages nor sick pay. Annual and sick leave payments are considered a continuation of salary. B. These payments are treated as follows: 1. When sick pay is received within 6 months after stopping work, and it is not attributable to the employee’s own contributions through payroll deduction to a sick pay plan, treat as earned income. 2. When sick pay is received within 6 months of stopping work, and it is attributable to the employee’s own contributions through payroll deduction to a sick pay plan, treat any portion of the sick pay received by the employee which, according to the employer is attributable to the employee’s own contributions, as unearned income. 3. When sick pay is received more than 6 months after stopping work, treat as unearned income. a) To determine the 6-month period after stopping work: 1) Begin with the first day of non-work. 2) Include the remainder of the calendar month in which work stops. 3) Include the next 6 full calendar months. b) Example: If an individual stops work on May 5, the 6-month periods ends November 30th.