Reclaiming Company Sick Pay: guidance for employers when a third-party claim is involved

Understanding the right to reclaim

Employers often provide CSP as part of their contractual obligations to employees. However, when the absence is caused by a third party - such as in a road traffic accident or other negligence-related incidents - the employer may have a right to recover the CSP from the third party’s insurer. This is typically done through a process called subrogation, where the employer steps into the shoes of the employee to recover their financial losses.

Key steps for employers

1. Check employment contracts and policies 
Before proceeding, employers should review the employee’s contract of employment and the company’s sick pay policy. Ensure there are provisions allowing the employer to recover CSP in cases involving third-party claims. Many contracts include clauses requiring employees to cooperate with the employer in such recovery efforts.

2. Communicate with the employee
Open communication with the affected employee is essential. Employers should explain the intention to recover CSP and the need for the employee’s cooperation. This may include:

• Informing the employee that the CSP paid is being claimed from the third party.
• Requesting the employee to include the employer’s losses in their claim against the third party.

3. Obtain the employee’s consent
In most cases, employers will need the employee’s consent to pursue recovery. This is because the employee is typically the primary claimant in any third-party claim. The employer’s losses, including CSP, are often included as part of the employee’s overall claim.

4. Keep detailed records  
Employers should maintain accurate records of:  

• The amounts paid as CSP
• The dates of absence and payments made
• Any correspondence with the employee or third parties regarding the claim.  

These records will be critical in substantiating the claim for reimbursement.

5. Engage with the third party or their insurer  
Employers can either:  

• Request the employee’s solicitor to include the CSP in the employee’s claim; or  
• Contact the third party’s insurer directly to recover the CSP.  

It is often more practical for the employee’s solicitor to include the employer’s claim as part of the overall settlement.

6. Consider legal advice  
If the recovery process becomes complex, or if the third party disputes liability, employers may benefit from seeking legal advice. A solicitor can help ensure the claim is pursued effectively and in compliance with legal requirements.

Practical tips for employers

• Act promptly: Delays in pursuing recovery can complicate matters. Employers should take steps as soon as they become aware of the third-party claim.  
• Maintain cooperation: A positive relationship with the employee can encourage their cooperation, which is often essential for a successful recovery.  
• Understand limitations: Recovery may not always be straightforward. For example, if the third party is uninsured or disputes liability, the employer may face challenges in reclaiming CSP.

Conclusion

Employers have the right to reclaim Company Sick Pay from third parties responsible for an employee’s injury or illness. However, this process requires careful planning, clear communication with the employee, and a thorough understanding of the legal framework. By taking proactive steps and seeking legal advice where necessary, employers can recover these costs while maintaining a positive relationship with their workforce.

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For more information or advice, please get in touch with Mandy Yeandle in our Personal Injury team.