The Hidden Cost of Statutory Leave for Temporary Workers – And Why Outsourced Employment is the Smarter Choice
When your temporary workers go on Statutory Leave (SSP, SMP, SPP etc.), it might seem like a minor admin task. But in reality, it’s silently draining your margins – particularly if you’re managing it in-house.
Government-mandated payments are only part of the picture. What’s rarely discussed is the true cost of temporary staff going on statutory leave: holiday pay continuing to accrue, employer pension contributions, and compliance admin – much of which isn’t reclaimable.
If you’re still handling this in-house, you’re likely paying far more than necessary.
Why Temporary Workers on Statutory Leave Cost You More Than You Realise
Just like your permanent staff, temporary workers continue to accrue holiday pay while on statutory leave. That’s a direct cost to your business – one that many employers overlook.
You’re also still on the hook for:
- Holiday Pay Advanced, or an Adjustment at return
- Employer’s National Insurance
- Apprenticeship Levy
- Employer Pension Contributions
And yes, these costs apply even when the worker isn’t contributing operationally.
Breaking down the cost: Statutory Sick Pay (SSP)
SSP is not reclaimable. If a temp goes off sick, the cost is entirely yours.
Using a weekly wage of £538.52, here’s the real-world impact:
Weekly cost snapshot (SSP – 28 Weeks):
| Item | Amount |
| Statutory Sick Pay | £118.75 |
| Holiday Pay Accrued | £65.00 |
| Employer’s NI | £13.14 |
| Apprenticeship Levy | £0.92 |
| Employer’s Pension | £12.56 |
| Total Weekly Cost | £210.37 |
Multiply that by 28 weeks and you’re looking at £5,890.36.
And what about Statutory Maternity Pay (SMP)?
SMP is partially reclaimable:
- Up to 108.5% with Small Employers Relief (if you pay under £45,000 in Class 1 NI)
- 92% reclaimable otherwise
Weekly Cost Snapshot (SMP – 39 Weeks):
| Item | Amount |
| Weekly Wage | £538.52 |
| SMP (first 6 weeks @ 90%) | £484.67 |
| Employer’s NI (first 6 weeks) | £68.03 |
| Apprenticeship Levy (first 6 weeks) | £2.75 |
| SMP (remaining 33 weeks) | £187.18 |
| Employer’s NI (remaining 33 weeks) | £23.41 |
| Apprenticeship Levy (remaining 33 weeks) | £1.27 |
| Employer’s Pension (full 39 weeks) | £12.56 |
| Holiday Pay Accrued (full 39 weeks) | £65.00 |
Final Cost after 108.5% reclaim and adjustments: £3,491.40 (higher if you can only reclaim 92%).
Even “recoverable” leave impacts your cash flow and profit margins.
Different challenges for different audiences
If you’re a recruitment agency:
- High turnover and short-term placements = constant eligibility checks and complexity.
- You’re not a payroll department. Every statutory leave claim eats into your fee margins and time-to-fill metrics.
- Compliance errors? That’s your liability, not the client’s.
If you’re a direct employer using temps in-house:
- You may assume temps are “cheaper,” but statutory leave costs show
- Each absence carries hidden costs you can’t reclaim.
- Admin burden on your internal HR/payroll team disrupts core operations.
Why outsourced employment is the smarter choice
Fair Pay Services is a UK-based payroll company, trusted by agencies and employers to take on the heavy lifting of outsourced employment and statutory leave.
Here’s why more organisations are switching:
- Less admin: We handle holiday accruals, NI, pensions and compliance.
- Less liability: We take on the financial cost and responsibility for making these statutory leave payments
- Legal compliance built-in: Stay ahead of HMRC changes and avoid penalties.
- Cash flow certainty: Predictable payroll costs – no nasty surprises.
- Worker satisfaction: Timely, accurate payments improve retention and referrals.
The bottom line
Managing temporary worker payroll and statutory leave in-house is a false economy. It looks cheaper, but it’s quietly eroding your margins and exposing you to compliance risk.