Briefing | Statutory Sick Pay reforms – are further steps needed?

Key reforms to Statutory Sick Pay explained 

The bill makes three key reforms to SSP by: 

• removing the current three qualifying or ‘waiting’ days, meaning that when it becomes law, employees will be eligible for SSP from day one of sickness absence
• extending eligibility to employees earning below the Lower Earnings Limit (LEL), currently £123 per week 
• giving responsibility for enforcement of SSP to a new single enforcement body, the Fair Work Agency, once set up. 

The CIPD welcomes these reforms as we have championed the need for effective SSP reform for several years. We have responded to previous government consultations on the topic, conducted research and gathered insights from members to inform our policy recommendations.  

But will these reforms alone achieve the government’s aim of ensuring that “no one should be forced to choose between their health and financial hardship” become evident over time? Or are further changes needed to create an effective financial safety net for people when they are too ill to work? 

What is an effective SSP rate for lower earnings? 

The consultation has one focus – to determine an appropriate percentage of earnings that should be paid to employees earning below the LEL. The consultation paper says:  

“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”. 

Different modelling for low earners is presented based on percentage rates ranging from 60% to 80% of their earnings.  

It’s completely right that an employee should not be paid more to be off sick than they would receive through normal wages if they were working. That could act as a perverse incentive and not encourage a timely return to work. But it could be argued that an  important principle for extending SSP eligibility to the lowest-paid and most vulnerable  is to provide an effective financial safety net in the event of ill health. This should, at the very least, ensure that  low-paid employees who will now be eligible for SSP are not worse off under the new system.  

And yet the consultation highlights the case of some employees who currently earn just above the LEL who may see a reduction in their weekly SSP entitlement following these reforms, as they would no longer qualify for the flat rate. For example, an employee earning £125.00 per week would receive £75 per week in SSP if the percentage rate is set at 60%, compared to £116.75 currently. 

The CIPD’s view is that low earners, who are likely to be the most financially vulnerable, should be eligible for the weekly flat rate of SSP or their wages, whichever is the lowest. Many employees, typically working for large and/or public sector employers and in higher-paid jobs, receive much more generous occupational sick pay as part of their terms and conditions. In the public sector, this is very likely to be full pay for as long as six months of absence, followed by half pay for a further six months. Therefore, it seems fair that lower earners should at least be eligible for the flat rate of £116.75, or their normal weekly wage if it is lower. 

Further reform is needed 

The legislative changes set out in the ERB are a very good step in the right direction for SSP reform. We must acknowledge the additional financial burden that will fall on organisations, particularly small and micro businesses, because employers are solely responsible for paying SSP. Removal of the three waiting days for receiving SSP will have the biggest impact.  

However, the CIPD and previous government consultations have considered the need for more far-reaching reform for an effective sick pay system to support people’s health. Further changes are needed which are supported by evidence gathered from our survey of 1,176 HR professionals, many of whom are CIPD members, conducted in the autumn of 2024. For example: 

• Improving the SSP rate. The current weekly flat rate of SSP at £116.75 is very low and represents a poor level of income replacement for many employees who need to rely on this financial safety net if they cannot work through illness or injury. Our findings show that 45% of HR professionals believe the rate of SSP should be higher, while just 4% believe it should be lower (36% say it should stay the same). The Inquiry and report of the Work and Pensions Select Committee has also recommended an increase in the rate.
• Making SSP more flexible. The current SSP system is inflexible as an employee can’t receive a combination of SSP and normal wages, for example, to enable a return to work on a phased basis where that individual is not 100% fit but may be fit for some work. The Work and Pensions Select Committee also recommended this reform. In the CIPD survey, 65% of employers support SSP being paid on a part-time basis in conjunction with wages, to facilitate a phased return to work (just 8% oppose).
• Support for small and micro businesses. The legislative changes already in the bill, and any further reform, has to consider the capability and resources of small and micro businesses. The government’s SSP consultation paper notes that small and micro businesses pay around 60% of the annual SSP cost to employers and make up around 47% of businesses. This means the ERB reforms will have a disproportionate impact on small and micro businesses. There is scope to improve the support provided to small and micro firms. For example, people management capability in smaller firms could be strengthened to improve absence management practices where needed. 

The UK’s SSP system has been broken for a long time, and we need a longer-term root and branch review of how it could be reformed to better support the health of the working-age population. Further, SSP reform cannot be considered in isolation.

We need public policy change across the work and health agenda, including a national quality occupational health offering to SMEs, to really shift the dial on workplace health. We look forward to continuing our work in partnership with the government on this agenda and collaborating with other organisations who share similar goals for SSP reform as part of the Safe Sick Pay campaign.