Is it time for a new statutory sick pay scheme that supports both employers and employees?

There are growing calls for improvement in Statutory Sick Pay functionality in the UK to support better well-being, productivity and living standards, to help both employers and employees.

The overriding view is that, as a country, we are failing people, especially in times of poor health and sickness, which is detrimental to our country’s growth. Far too many people are falling out of work for health reasons, impacting those individuals and their families, with knock on economic consequences.

An Unum-commissioned report by the WPI Economics Consultancy is one of the latest studies highlighting the significant shortcomings in the UK’s Statutory Sick Pay system (SSP). Let’s take a closer look at some of the issues…

What’s the cost of SSP?

Ill health negatively affects our economy in the region of £130 billion a year. Sickness absence equates to the loss of over 140 million working days in a year, causing significant financial and well-being concerns. A new system is needed to care adequately for sick people and maximise their chances of returning to work.

The UK’s statutory sick pay system has not changed in 40 years, whilst the working environment it is trying to support has evolved enormously. Of course, we can never eradicate work days lost due to sickness – nor should be aiming to. After all, we are all human. But currently, sick pay offers no protection for the lower-paid. There is no opportunity to empower employers to deliver support and early intervention for sickness that could be better addressed within a new sickness support scheme.

A new Statutory Sickness Support strategy could accommodate the current working environment and extend beyond the current low-pay support.

Issues with the current Statutory Sick Pay System

According to the report by WPI Economics, the current sick pay system is far from keeping up with the agile workforce of today, and fails to take account of ageing populations and later retirements, or the gig economy.

In the current outdated system:

• low-level statutory payments are provided for just a little over six months
• employers are not required to report payment of SSP
• the number of days lost due to sickness is far greater than the SSP payments made
• around 2 million low-paid workers do not qualify for SSP
• there are “waiting days” where no payment is made even for those who qualify
• employers pay direct costs of between £100m and £250 million each year
• there is a growing decline in the number of companies providing enhanced occupational sick pay
• most people receive amounts far lower than their regular earnings and much lower than comparable European economies

What new Statutory Sickness Support should look like

A fit-for-purpose support package could help businesses to enhance employee health and wellbeing in order to improve health outcomes and prevent sickness. A new system could learn from sickness support policies of advanced economies around the world by providing:

• A better-targeted safety net that encourages a return to work where possible yet protects incomes adequately during sickness
• Effective employer incentives for better workplace health provision
• Increased tax revenue and reduced spending on social security benefits
• Cross-party support to reach a range of societal stakeholders
• Protection for all workers, support phased working return and accommodate flexible working to help workers of all abilities
• A strengthened safety net to alleviate financial hardship that periods of sickness cause by income drop shock and associated poverty, which ultimately damage the economy further
• A simplified employer administration for better accountability and budget monitoring

These proposals would generate in the region of £120 million a year in Exchequer savings and £500 million wider economic benefit. The programme should provide more robust guidance for employees on managing absence, new conditional SSP rebates to reward employer effort and a package of measures so that SMEs can invest in proven support for employees.

The impact of sickness on productivity

Productivity is crucial to economic growth, and poorly managed approach to illness and sick pay hits productivity and costs the economy, making a revision of the statutory sick pay provision much needed. Work is good for our health, yet we must update our outdated sickness policies to improve individuals’ opportunities to return to work in a supported capacity. The investment in a new Statutory scheme should help businesses and create opportunities for phased, sustainable returns to work.