A select committee has called for reforms to statutory sick pay (SSP) as the benefit is “failing in its primary purpose” as a safety net for ill employees.
In a report from the Work and Pensions Committee, MPs recommended increasing the SSP rate and said that the benefit should be made more widely available.
Currently a person is only eligible for the payments if they are classed as an employee and earn an average of at least £123 per week (the lower earnings limit). However, the report said that all employees should be eligible for SSP, not just those earning above the lower earnings limit.
It also recommended raising the SSP rate in line with statutory maternity pay, which it said “would strike a reasonable balance between providing extra financial support and not placing excessive extra costs on businesses”.
UK rates of sickness absence and ill health have increased in recent years, with a record 185.6 million working days lost to sickness or injury in 2022.
Previous governments have held consultations to assess the effectiveness of sick pay, but these did not result in permanent changes, the report said.
The committee said it understood why the government decided that the Covid-19 pandemic was the wrong time to introduce changes, given the impact that immediate additional costs would have had on employers. But it added that today this argument is “less valid”.
MPs recommended further changes that would enable SSP to be paid in combination with usual wages to encourage phased returns to work.
Rebate for small businesses
The committee acknowledged that the overall impact of SSP reform is “difficult to predict”, but said that even if the changes did not result in reduced sickness absence, larger firms would be able to absorb the costs.
The same would not be true of smaller businesses, however, and the report called on the government to consult with small and medium-sized businesses on a small business rebate for SSP.
The committee also recommended that the government should set up a “contributory sick pay scheme for the self-employed” to increase support during periods of illness.
Committee chair Stephen Timms, said: “SSP is failing in its primary purpose to act as a safety net for workers who most need financial help during illness. With the country continuing to face high rates of sickness absence, the government can no longer afford to keep kicking the can down the road on reform.
“The committee’s proposals strike the right balance between widening and strengthening support and not placing excessive burdens on business.”
Rachel Suff, senior policy adviser at the CIPD who gave evidence to the committee inquiry, said the SSP system is “broken”.
“We are fully supportive of the recommendations to expand eligibility to those on the lowest incomes by abolishing the lower earnings limit as well as raise the SSP rate.
“We also welcome the recommendation to make SSP more flexible to support phased returns to work by enabling SSP to be paid on a part-time basis. Given the high numbers of people with long-term health conditions and on long-term sick, this could make a big difference to them returning to work in a more supported and sustainable manner.”
Suff said that CIPD research shows it’s the right time to have a more in-depth review of other aspects of SSP, such as how a new system could better support small businesses as well as the self-employed. Reform of SSP needs to be aligned with other work and health reforms, she said, such as improving access to quality occupational health provision, particularly for small firms.
These recommendations are “just one step” towards addressing the UK’s challenges around sickness rates and economic inactivity, she said.
“Both the UK government and employers must look carefully at the root causes for absence. This means managing the main risks to people’s health from work to prevent stress, as well as early intervention to prevent health issues from escalating where possible.”
GRiD spokesperson Katharine Moxham said the risk body supports calls for SSP reform.
“Increased SSP liability would strengthen the workplace link and encourage employers to invest in workplace health, as well as improve safety nets and deliver fiscal benefits to the exchequer, by helping people to remain in productive employment.
“The government should consider how smaller employers can be supported, for example with a conditional rebate if they can demonstrate sufficient employee support is in place, so that they are not overly burdened by increased SSP contributions.”
Moxham added that GRiD was pleased to see that the report recognises the role that group income protection (GIP) could play, particularly in helping small businesses cover the cost of sick pay.
“Along with the Work and Pensions Committee, we welcome the government’s plans to work with employers to raise awareness of the benefits of GIP.“
