Reforms to statutory sick pay (SSP) could cut the number of people moving onto employment support allowance (ESA) by 43% and save the taxpayer £139 million a year, the thinktank Demos has suggested.
Some 300,000 people a year move through SSP to ESA costing the Government £385 million per year, but only 65% of people on long-term sick leave ever return to work.
The move comes in the wake of the Government unveiling a wholesale review of sickness absence in February, which is being led by national director for work and health Dame Carol Black and British Chambers of Commerce director-general David Frost.
It also recommended that savings above £16,000 should be exempt from means testing for the first six months of unemployment to encourage the “squeezed middle” to benefit from government support that they contribute to through NI contributions.
This, it argued, would soften the blow that comes with sickness- or disability-related unemployment by allowing people to keep up mortgage payments and give them more of an incentive to get back into work within six months before means testing kicked in.
On top of this, employers should be obliged to insure their employees against the risk of accidents, ill health and disability, it added.
There has been speculation that the sick pay system could be a key target for reform once the absence review reports later this year.
The Government is thought to be looking at the possibility of allowing employers to pay for income protection insurance for their staff instead of providing paid sick leave, but will wait to make a decision until the review is complete.
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