Overhauling the UK’s 40-year-old statutory sick pay system could benefit the UK to the tune of £3.9bn as well as provide better support for millions of workers, according to new proposals for reform.
For employee benefits provider Unum UK, the current statutory sick pay system, which has gone largely without reform since its inception in the early 1980s, has failed to reflect changes in the way the working population lives and costs the exchequer an unnecessarily high amount of money to administer.
Unum’s proposals, informed by research carried out by WPI Economics, would see the concept of statutory sickness “pay” being replaced by “support”, the simplification of calculation and administration by employers, much wider eligibility so that all workers are covered, and modernising the rules so that flexible working is included.
Workers on SSP receive £99.35 a week, while about two million workers – 70% of them women – do not qualify for SSP. Despite this lack of provision and low rate of pay, the system directly costs the exchequer £850m annually in lost taxation and increased benefit spending.
A new system of “statutory sickness support” would deliver proactive and effective employee support and strengthen the safety net to reduce “income shocks” and alleviate poverty.
Unum’s proposed reforms would boost the average “replacement rate” (the proportion of salary covered by SSP) for workers on SSP from 28% of earnings under the current system to 63%, with most of the benefits going to workers earning less than £25,000 a year.
Statutory sick pay reforms
Alongside reforming sick pay to better protect workers, statutory sickness support would assist employers with more guidance on how to prevent and manage employee sickness. Unum is calling on government to:
- provide targeted guidance and support for employers;
- introduce a new conditional sick pay rebate for small businesses who do the right thing; and
- launch a £500m fund to deliver a shot in the arm for SME investment in health at work.
The WPI Economics research estimated that implementing statutory sickness support would benefit the economy to the tune of £3.9bn over the next five years, as well as save the exchequer up to £1.3bn.
Unum is calling on policymakers to introduce statutory sickness support as soon as possible “to improve the health and productivity of Britain’s workforce”.
According to Simon Hodgson, head of public policy at Unum UK, the company has engaged HR and employer groups, think-tanks, campaigners, academics, and government officials over the proposals. He added: “Unum’s proposals are already gaining traction and have received positive reactions from policymakers and experts. We will be making the case for our proposals over the summer.”
Mark Till, CEO of Unum UK, said the current system was obsolete and unsustainable: “Tackling sickness absence should be a top priority. Statutory sick pay is a 40-year-old system that’s really showing its age: it offers no protection at all for the lowest-paid workers and misses the opportunity to promote early intervention and empower employers to deliver the right support for their employees to stay in or get back to work.
“We call on the government to introduce statutory sickness support to level up the health and wellbeing of Britain’s workforce and power the high-skilled growth our economy needs.”
Nick Pahl, CEO at the Society of Occupational Medicine pointed to the inequity of SSP. He said: “There is a need to level up access to occupational health, as large employers are five times more likely to have access than those in SMEs.”
Angela Matthews, head of policy and research at Business Disability Forum, also referred to the damaging effects on smaller firms of the current system: “Statutory sick pay is one of the main urgent issues causing widening workplace health inequalities and it has had far too little political attention to date.
“We have seen many large employers pick up the cost of a poor SSP system to prevent employees experiencing financial disadvantage, but this has become harder since the pandemic. Workers employed by smaller businesses experience greater financial disadvantage and, as this study highlights, poverty. This too often makes small businesses a less attractive employment option for workers, who are increasingly mindful of the importance of sickness and pay benefits when choosing an employer.”
She added that levelling up the country and increasing flexible work options would not be realised “unless we urgently remodel the SSP system”.