The COVID-19 pandemic has thrown an already ailing and financially inadequate Statutory Sick Pay (SSP) regime into sharp relief.
The UK Government introduced a number of welcome, albeit temporary, reforms to SSP entitlement in response to COVID-19, including:
- Extending entitlement to employees who need to self-isolate
- Removing the usual three-day waiting period before SSP is payable
- Introducing a Coronavirus Statutory Sick Pay Rebate Scheme whereby employers with fewer than 250 employees could claim back up to two weeks’ SSP.
However, the UK Government didn’t raise the SSP rate, which is very low compared with the majority of other European countries. Neither did it remove the lower earnings limit (LEL) for SSP, which requires an eligible employee to earn an average of at least £120 per week. This means that low-earners, including many part-time workers, can’t access SSP. CIPD research during the pandemic showed that almost a quarter (23%) of workers who would receive either SSP or no pay in the event of sickness absence would struggle to pay bills or buy food within just one week of sickness absence.
Despite the reform of SSP being a key focus of several consultations, the UK Government’s 2021 response to its reducing ill-health related job loss consultation made clear there are no plans to take forward any substantive proposals to improve the system.
Policy calls to government
Our calls to government are laid out in a new report, What should an effective sick pay system look like? which includes a survey of over 1,000 employers:
Extend protection to those on the lowest incomes and act now to:
- Expand eligibility for SSP by abolishing the lower earnings limit (LEL).
- Raise the level of SSP to be closer to the equivalent of someone earning the National Minimum Wage/National Living Wage (based on a pro-rata daily rate covering time taken off work sick, so a daily rate of £65.40 for someone working a 7.5 hour day).
Carry out a further consultation on wider reform of SSP, including issues such as:
- Whether or not SSP should be linked to earnings level.
- Amending SSP rules to allow for phased returns to work.
- Permanent removal of the three qualifying days for payment of SSP.
- Whether or not there should be a new payment structure whereby financial responsibility is shared between the state and employers.
Strengthen employer compliance with, and state enforcement of, SSP:
Expedite the introduction of a well-resourced Single Enforcement Body (SEB) to carry out proactive inspections in high-risk sectors to boost employer compliance with SSP. This should include an increase in the number of inspectors to one per 10,000 workers. Further, increase Acas’ budget to boost its ability to advise small employers and individuals on people management and employment rights, including on SSP statutory obligations.
Carry out a review
To explore if the insurance industry could develop group income protection schemes that overcome some of the perceived barriers such as cost, particularly for smaller employers.
Employers and employees have an important role to play
Any proposals to reform the SSP system need to engender the right behaviour on the part of employers and individuals. Reimbursement of SSP by the UK state to employers was abolished more than 20 years ago, primarily because it acted as a disincentive for organisations to take responsibility for the effective return to work of absent employees.
In the UK, SSP is payable by the employer to eligible workers for up to 28 weeks, one of the longest periods compared with other European countries. However, paying a higher amount of SSP, potentially for a shorter period of time, would reflect a more effective approach to encourage a quicker and more sustainable return-to-work.
Some employers go further than their legal obligation to provide SSP and offer enhanced financial support in the form of Occupational Sick Pay (OSP). This will typically form a contractual payment, offering a potentially valuable benefit for employees of financial security should they fall ill. As such, OSP can help to build the employer’s reputation as a good place to work and act as an effective recruitment and retention tool. The majority of employers (59%) in our survey agree that there’s a business case for providing OSP to staff.
OSP should form part of an organisation’s wider strategy to invest in the health and wellbeing of its workforce. If designed and implemented properly, it should incentivise the organisation to proactively manage sickness absence and facilitate an effective return to work. There are important considerations for employers when designing their OSP system. The laudable aim of an income to help prevent financial hardship needs to be balanced with not unintentionally embedding a disincentive to return to work when they are well enough.
Additional support is needed for SMEs
Some may argue that smaller employers may not be able to bear an increase in the cost of SSP. However, our Policy Forum roundtable to inform the policy paper included this comment from a participant: ‘From working with SMEs, there’s a consistent view that [SSP] is too low, and as a consequence, people are turning up to work when they are too ill… If SSP went up, it would encourage more SMEs to manage sick leave.’ And another had this to say: ‘Organisations that are able to pay above the minimum tend to as it helps attract staff, improves brand image, and helps to sustain the environment you operate in as an organisation - so there is an incentive for organisations to pay.’
The previous phased introduction of auto-enrolment duties for occupational pensions in the UK is a good example of how new SSP obligations could be introduced. For example, an initial low level of minimum contribution by employers, extending from large to small employers over time, and then ramping up contributions, with supporting advice and products as part of the staged rollout. Therefore, we recommend that a further consultation looks at how SMEs can be better supported, particularly very small employers.
The self-employed also need better income protection
The pandemic has highlighted the need for self-employed people to contribute to, and benefit from, some form of income replacement support when sick. In the UK, self-employment represents a growing and significant proportion of the labour market but it’s a broad category and includes many different types of work. The Taylor review rightly says it would be wrong to treat all self-employed people the same, but highlights the need to tailor policy interventions to those who require support. We, therefore, call on Government to:
- Investigate opportunities to improve income protection for the self-employed during ill health or injury.
- Work with stakeholders to take forward the recommendations set out in the Taylor review, including the potential for portable benefits platforms to provide a safety net.
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