Question

Under what conditions is an employer required to accrue a lability for sick pay? Under what conditions is an employer permitted but not required to accrue a liability for sick pay?

Short answer

An employer is required to accrue a liability for “sick pay” those employers are permitted to collect and use their free time though their absence is because of illness. An employer is permitted but they are not needed to accrue to liability to sick pay those employees are permitted to claim only as a consequence of actual illness.

Step-by-step solution

Meaning of Liability

Liability is a binding debt that is ought to be paid to another business. These are undergone so as to fund the day-to-day activities of a business.

Conditions under which an employer is required to accrue a liability for sick pay

Employer must accrue a liability for the non-availability if certain criteria are met:

• Employer’s liability to provide payment for future leave is obtained from the past services provided by them.

• Employees’ rights to paid leaves either vest or accumulate.

• Employer’s payment of the remuneration is predictable.

• Employer can logically estimate the value of its debt.

Conditions under which an employer is permitted but not required to accrue a liability for sick pay

Conditions under which an employer is allowed but are not needed to accrue a liability for sick pay. These are:

• If sick pay advantages are disbursed after completion, accrual is needed.

• If sick pay advantages can be carried forward but do not vest, accrual is allowed but not essential.