Reforms to sick pay being introduced by the Employment Rights Bill could deliver benefits of more than £2bn to the UK economy, analysis for the TUC suggests.
New sick pay regulations coming into force next April will give employees the right to claim statutory sick pay from the first day of illness, and 1.3 million of the lowest earners will be entitled to 80% of their weekly wages.
Analysis by WPI Economics, commissioned by the TUC, projects that the benefits to employers will be around £2.4bn, while costs to businesses will be £425 million.
This projection is based on the assumption that a day-one right to SSP will help to reduce sickness absence, limit the spread of illness in the workplace, and employees will recover more quickly and return to work.
Sick pay benefits
The TUC also argues that better support for sick workers will increase productivity and reduce staff turnover as employees will be able to better manage their health when they take time off.
The reforms will also benefit the public purse, according to the TUC. Increased tax revenue and lower social security payouts will provide an additional £800 million to the Exchequer, the analysis predicts, while reduced economic inactivity due to illness will add £700 million a year.
The recent Keep Britain Working review revealed that the UK is the only advanced economy where economic inactivity is increasing.
The TUC said the current wait period for SSP of three days had meant that many eligible workers were forced to go without pay for the first few days of illness, while millions of others missed out because they earned too little to qualify.
The reforms will “stop millions from facing a financial cliff edge if they’re sick”, said TUC general secretary Paul Nowak.
“With sick pay rights from the first day of sickness, workers will know they can take the time they need to recover without needing to rush back to work.
“That’s good for business and the wider economy too. A healthier, happier workforce is a more productive workforce.
“Making statutory sick pay available to all workers – and from day one – shows why the government’s Employment Rights Bill is so important.”
Despite its support for the reforms, the TUC is campaigning for the government to increase the rate of SSP.
Although the government will remove the lower earnings threshold, meaning many more workers will qualify, the rate itself will remain at a similar level to the current flat rate of £118.75, or 80% of weekly wages, whichever is lower.
Matthew Oakley, founder and director of WPI Economics, said: “Sickness absence costs the economy – simple as that – and it impacts affected workers severely in terms of lost earnings.
“Improving sick pay would enable people to take the time off they need to recover and lower the number of people taking extended sick leave, stemming the flow of unwell workers onto out-of-work benefits and boosting productivity.
“As the government looks for fresh ideas to give the UK a competitive edge, a wider overhaul of sick pay and better incentives for employers to invest in occupational health should be front and centre.”
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