Several core parts of the Employment Rights Bill are being consulted on, giving the public, businesses and employees the chance to influence reforms around workers’ rights. Here, Adam McCulloch examines the discussions around moving forward on statutory sick pay.
Among the key policies of Making Work Pay is the upgrading of statutory sick pay. The changes, which apply to England, Scotland and Wales, will be incorporated into the Employment Rights Bill which had its second reading in the Commons yesterday.
At least part of the determination to reform SSP came from the UK’s experience of Covid lockdowns 2020-2022. The consultation, which closes on 4 December 2024, states: “The pandemic exposed just how precarious work and life is for those on acute low incomes. No one should be forced to choose between their health and financial hardship.”
An impact assessment looking at options for improving access to SSP has listed the benefits of change. It states: “Significant non-monetised benefits include improved health outcomes, including indirect effects for the wider workforce and reduced financial stress for employees eligible for SSP.”
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It adds that reform would reduce presenteeism and the transmission of infectious diseases and encourage people to return to work as part of a phased return, without fear of being penalised if they had to take further sick leave. Health and educational outcomes may improve for workers’ families while businesses may experience improvements in productivity.
The 2024-25 rate of SSP is £116.75 per week. To gain access to payments, an individual must: be classed as an employee and have done some work for their employer; earn at least the lower earnings limit (currently £123 per week); and have been sick for at least four consecutive days. SSP is not payable for the first three qualifying days of sickness, so-called “waiting days”.
Waiting days to be scrapped
The consultation document states that the eventual Employment Rights Act will remove the requirement to serve waiting days and will extend eligibility to those earning below the lower earnings limit. Perspectives on these plans are being sought from the public, employers and trade unions.
There is a wide-ranging body of evidence, medical, academic and from leading UK thinktanks and charities, that suggests the current SSP system harms workers and is self-defeating for employers and the government alike” – coalition of health charities in a letter to the government
Removing waiting days is a priority, say ministers, because presenteeism costs the economy tens of billions of pounds each year. Here, the government cites an Institute for Public Policy Research paper which reports that employees last year lost 43.6 productive days – 11 on average due to presenteeism but 6.7 days through absenteeism. In 2018, 34.8 days were
lost due to presenteeism, and 3.7 days due to absenteeism. The IPPR says: “These are drastic increases only in the past few years.”
What will replace the lower earnings limit?
As for the lower earnings limit (LEL), ministers calculate that up to 1.3 million employees are excluded from SSP, with a disproportionate impact on those working in low-paid, part-time or multiple jobs. They state that women and young people will particularly benefit from removing the LEL.
But simply removing the LEL would lead to some people who earn less than £116 per week receiving in effect a pay increase while ill as SSP would pay more than their salary. This would obviously be unjust so ministers recommend paying an SSP rate that is a percentage of salary, while those earning more than £116 will continue to receive the flat rate.
The statutory sick pay consultation will establish what that percentage should be. It states: “It is important that this percentage strikes the right balance between providing the financial security that employees need, retaining the incentives to return to work when appropriate, and balancing the costs to businesses.”
The percentage will likely be set between 60% of earnings – the lowest rate government modelling suggests would not leave employees worse off – and 80%, as proposed in the 2019 Health is Everyone’s Business consultation.
Ministers envisage that if the percentage rate is 80%, an employee earning £100 per week would receive £80 per week in SSP, while an employee earning £150 would be paid the flat rate of £116.75.
Depending on the percentage rate set, some employees who currently earn just above the LEL may see a reduction in their weekly SSP entitlement as they would no longer qualify for the flat rate. For example, an employee earning £125 per week would receive £75 per week in SSP if the percentage rate is set at 60%, compared with £116.75 currently.
Overall benefits
This may appear harsh on some lower-paid individuals but their loss will be made up by the fact there are no waiting days, so as long as their absence is no more than a few days, they will better compensated. It is calculated that overall, employees would not be worse off with a proportionate rate of 60%.
It adds that most of the cost increase to businesses would be a result of removing waiting days, estimated at about £36 per employee”
A higher percentage rate would, however, be more effective in tackling presenteeism, says the government, because it reduces the potential for people earning above the current LEL to “lose out” compared with their current rate of sick pay.
The impact assessment acknowledges that businesses were likely to face increased costs because of the higher number of employees that would become eligible for SSP. Given that small and micro businesses (SMBs) are more likely to pay sick pay at SSP than at above SSP, SMBs will be more likely to face a greater proportion of the cost increases, the assessment states.
It adds that most of the cost increase to businesses would be a result of removing waiting days, estimated at about £36 per employee. But businesses should bear in mind the benefits of the changes: “a reduction in sickness absence duration, increasing employers’ output and profit as the number of days worked at full productivity increases”. Overall, the document states, the two indirect sickness absence impacts have no net direct impact on businesses but more broadly, productivity should improve.
Pressure from health charities
Charities including Citizens Advice, Macmillan Cancer Support, Mind and Maggie’s have called on the government to amend the Employment Rights Bill so ministers can increase statutory sick pay. They wrote in a letter to prime minister Keir Starmer saying: “There is a wide-ranging body of evidence, medical, academic and from leading UK thinktanks and charities, that suggests the current SSP system harms workers and is self-defeating for employers and the government alike.
“This situation risks holding back the government’s laudable mission to grow the economy and bolster our NHS.”
As Starmer himself told the TUC conference in 2021: “We have one of the lowest rates of sick pay in Europe. It’s not good enough. So as well as guaranteeing sick pay, Labour’s new deal will increase it as well.”
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