Hidden costs of incapacity benefit tests

Employers will have to pick up the tab when ‘benefit scroungers’ are forced to work.

New incapacity benefit tests due in October 2008 look set to force a significant number of people who are disabled or have been unable to work owing to long-term sickness into the workplace. This could place an additional cost on the employer through the financial and administrative burden of dealing with these new employees.

The Department for Work and Pensions estimates that there are 2.64 million people currently claiming incapacity benefit and that the proposed reforms are likely to reduce this number by only 20,000. Yet commentators fear up to 1.3 million people will be forced into the workplace under the new test.

Work and pensions secretary Peter Hain recently put the cost of incapacity benefit for 2006-07 at £12.5bn, so taxpayers might be seduced into thinking that getting ‘benefit scroungers’ back to work can only be positive.

Public perceptions

This has not been helped by the Times newspaper’s request under the Freedom of Information Act, which showed that 2,000 people claiming incapacity benefit were classed as “too fat to work”, costing the taxpayer £4.4m a year, with 50 people citing acne as the reason for their claim.

These reports help colour the public view that reducing the number on incapacity benefit can only be good.

But the potential implications for UK employers could be very damaging and could put the progress of disability rights back several years. If some of those currently on incapacity benefit are forced back into the workplace too soon, they are likely to have motivational issues and high levels of sickness absence.

Reasonable adjustments

Those people whose condition qualifies under the Disability Discrimination Act 1995 (DDA) are entitled to reasonable adjustments, which could be a costly process for the employer, involving several meetings, assessments and the purchase of equipment.

Where the disabled worker works hard and has a good attendance record, the reasonable employer should not begrudge that outlay. However, for the less motivated who are forced back to work, the employer is likely to question making adjustments. This could further increase prejudice against disabled workers, making it more difficult for the many workers who do not let their disability affect their work.

The actual process of determining what reasonable adjustments need to be made – and how they are going to be implemented – will also be hindered where the employee keeps going on sick leave. This is going to have an inevitable cost impact on the employer, not to mention a disruption of their working practices caused by the absenteeism.

No support

Opposition parties have focused on the fact that support for people to return to work should be at the forefront of these changes. This needs to include support for employers both in terms of identifying and making reasonable adjustments, and also in dealing with the financial cost of doing so.

Unfortunately, no criteria has been laid down and there appears to have been little or no debate on the impact this will have on employers.

The risk of tribunal claims for employers starts from the point at which they place an advertisement for a vacant position and so the individual does not even need to be an employee to claim under the DDA.

So while the government takes the political gain of the proposals, it seems that the employer will silently bear the financial burden.

Vanessa James
Partner and head of employment,
SA Law

Key points

  • From October 2008, the criteria for assessing applicants for incapacity benefit will change in an effort to reduce the number of people able to claim.
  • The government estimates that 20,000 people will no longer be eligible under the new test, but commentators put the figure at up to 1.3 million.
  • Employers are likely to incur an increased cost burden and greater risk of tribunal litigation, yet there does not appear to be any proposals for supporting employers.
  • Some incapacity benefit claimants will simply be shifted from this to unemployment benefit because they are unable to obtain work.

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