A new report commissioned by employee benefits provider Unum UK argues that the UK’s current Statutory Sick Pay (SSP) system is no longer fit for purpose and proposes replacing it with Statutory Sickness Support.
Unum UK, which launched the report in parliament on 19 May, says its proposed initiative would need £500 million in government funding to reform the current system but could boost the UK economy by £3.9 billion over five years.
As the report authors note, sickness absence is estimated to cost the UK economy up to £130 billion annually. In addition, the government is spending up to £29 billion in foregone tax and National Insurance contributions due to people not working as a result of their ill-health. Unum UK argues that reducing sickness absence could ‘unlock billions in tax receipts and increased economic output’.
Part of the problem, the report argues, is the requirement for businesses to record and report Statutory Sick Pay payments was removed in 2014. This means it is difficult to quantify the ‘exact scale of SSP in payment and the associated costs for businesses’.
The authors note how an estimated 141.1 million working days were lost to sickness in 2018 yet the number of absences resulting in payments is far smaller due to SSP’s various eligibility criteria, including ‘waiting days’.
Significantly, SSP also hasn’t kept up with changes in work patterns over the past four decades. An increasing number of people now have flexible work arrangements, work part-time or are employed in the gig economy. In addition, SSP hasn’t evolved to take the UK’s ageing population into account.
Another criticism is that SSP’s provision of ‘very low levels of payment’ has a knock-on effect on other ‘undesirable policy outcomes’, notably higher state expenditure on social security benefits. This is estimated to cost the government around £850 million a year.
‘The current system does not encourage or guide employers to provide comprehensive and effective sickness absence management support,’ the authors argue.
Statutory Sickness Support
‘Reform of SSP has the potential to strengthen employer incentives to reduce levels of sickness absence. Insurance models offer a way to pool risks and resources with other firms, and allow even the smallest employers to access a comprehensive package of support which has a strong track record of improving absence outcomes.’
The report notes that for any new system to succeed, it must provide the following requirements:
This new system would enhance eligibility so that all workers are protected. By extending it to include workers with earnings below the lower earnings limit of £123 per week. Around two million more workers would gain protection in the event of sickness, the report argues.
By shifting to an hourly rather than weekly calculation, and allowing sick pay and regular earnings simultaneously, the authors argue this would take account of part-time or flexible working. It would also give employees the option of a ‘phased return’ to work.
Importantly for businesses, Statutory Sickness Support makes it easier for employers to calculate sick pay for employees with working patterns that change week to week.
Unum UK says its proposed Statutory Sickness Support system would offer better protection for all of Britain’s workers, but particularly the low-paid.
It argues the reforms would enhance the average ‘replacement rate’ – the proportion of an employee’s salary covered by SSP – from 28% of earnings under the current system to 63%, with most of the benefits going to workers who earn less than £25,000 a year.
‘Many more workers would have access to health and wellbeing support at work, reducing the risk and length of absence and supporting a strong economy, benefits system and health service,’ the report concludes.
Source: IOSH
Published: 14th June 2022