Solving the problem of sick pay

The coronavirus pandemic highlighted just how broken our sick pay system is, yet the previous government did nothing to fix it. The government’s Plan to Make Work Pay commits to various measures to strengthen sick pay. Over the weekend, briefing to The Times suggested that action will be taken in the forthcoming Employment Rights Bill. Here’s the challenge that needs to be addressed.

What’s the problem with our sick pay system?  

If a worker is off sick, one of three things usually happens: they’ll be paid in full as normal (referred to as occupational sick pay), they’ll receive statutory sick pay (SSP – the legal minimum for employees who are eligible), or they’ll get nothing at all.

A nationally representative survey conducted by BritainThinks on behalf of the TUC in May 2022 found that around half of employees (54 per cent) get their full pay as usual, with 28 per cent reliant on SSP and 1-in-10 getting nothing at all. A small percentage get somewhere between the legal minimum and their full pay as usual. There’s a class divide when it comes to who gets what. 80 per cent of high earners (over £50,000 a year) get full pay when off sick, compared to a third of low earners (less than £15,000).  

This means around 8 million mostly low-paid employees are reliant on SSP when off sick, and around 2.8 million tell us they don’t receive any sick pay at all.

Improving statutory sick pay

Having large numbers of workers reliant on SSP is a problem for three key reasons: 1. SSP is not available to all, 2. for those that do get it, the level of payment is too low, and 3. it doesn’t kick in until the fourth day of absence.

Let’s start with the first of these: it’s not available to all. Some workers miss out on statutory sick pay (SSP) due to the “lower earnings limit”. Workers only receive SSP if they earn at least £123 per week. This rule leaves around 1.15 million low-paid workers without access to SSP, with the majority of these (69 per cent) being women. Scrapping the lower-earnings limit would extend SSP to these workers. The previous government consulted on scrapping this rule, but U-turned on this during the pandemic.  

Secondly, the three-day wait for SSP. Currently, a worker has to be off work sick for three days before they receive SSP. This means that, for an employee working a typical five-day week, SSP in the first week drops to just £47. This is far from enough to live on. Scrapping the three-day wait would mean sick pay from day one for the millions of workers who currently rely on SSP.

And finally, SSP is too low. It’s currently paid at £116.75 per week, which is just 18 per cent of the average weekly wage. The UK’s statutory sick pay is incredibly by low by international standards. OECD analysis at the start of the pandemic found it to be the lowest in any OECD country. It’s also low by the UK’s own historical standards – when SSP was first introduced in the 1970s, it was equivalent to 35 per cent of the average weekly wage.  

Fixing sick pay

Since the start of the pandemic, the TUC has made three simple calls: 

1. make SSP available to all workers by scrapping the lower earnings limit, 
2. remove the three-day wait for payment,
3. increase SSP.

There are promising signs that the new government will act. In its Plan to Make Work Pay (also known as A New Deal for Working People), Labour has promised to “strengthen statutory sick pay, remove the lower earnings limit to make it available to all workers and remove the waiting period”.

There are some concerns that higher sick pay and expanding entitlement to statutory sick pay will lead to unnecessary absences, but these concerns are misplaced. We currently have the opposite problem. Our sick pay system, and our working culture, push too many people into going into work when ill, known as “presenteeism”. A recent study found that workers in the UK are among the least likely to take sick days, and that this presenteeism costs the economy due to its impact on productivity.  

It is often also overlooked that around half of employees (54 per cent) already get full pay when off ill. As mentioned above, these are much more likely to be higher paid employees. This begs the question: why is pretty much every well-paid employee trusted to get full pay when ill, but low-paid workers aren’t and therefore have to get by on little to nothing when sick?

And finally, expanding SSP to all employees isn’t a drastic change. The vast majority (86 per cent) of employees already get some form of sick pay. Expanding SSP to all workers simply ensures that no one in employment misses out due to not being paid enough.  

The pandemic highlighted how broken our sick pay system is. We’ve waited far too long for it to be fixed. We need decent sick pay for all now.