Third-party Sick Pay Definition

Third-party sick pay is a sick or disability benefit payment made to an employee from a third party (such as an insurance company). It may need to be taxed and included in the employee’s W-2.

Third-party Sick Pay Extended Definition

Some employers use third parties to handle sick pay. When an employee is out sick (e.g., short-term disability leave), they receive third-party sick pay from the administrator instead of the employer.