Statutory Sick Pay Reform
Statutory Sick Pay Reform: fairness to employees
Background
This document briefly sets out the TUC's concerns about proposals for the simplification of Statutory Sick Pay. In our response to A New Deal for Welfare the TUC welcomed the Government's then proposal that the waiting days for Statutory Sick Pay should be abolished as a quid pro quo for the abolition of the paperwork around the linking rules. We argued, in support of this position, that three unpaid days of absence can be a serious problem, especially for low paid workers, who often have to budget on a week-to-week basis. We also suggested that requiring employers to pay Statutory Sick Pay from the first day should encourage more careful management of absence.
Going back further, the TUC opposed the creation of Statutory Sick Pay twenty years ago. As Deakin and Morris comment, 'their goal was to shift obligations which had previously been borne by the state social insurance system, in the form of unemployment and sickness benefits, on to individuals employers; rather than building on social security entitlements, they replaced them, while in general providing lower levels of payment.' (Labour Law, 4th edition, p 359) If the Government's first concern is to remove burdens from employers they should replace SSP with DWP-administered benefits.
Such a reform would, unfortunately, be outwith the Group's remit; the remainder of this document therefore concentrates on a final point the TUC made in response to A New Deal for Welfare:
'Some business spokespeople have suggested that the linking rules (and their associated paperwork) could be abolished but the waiting days retained; unions would oppose this - the linking rules are needed to protect vulnerable workers who would otherwise be unfairly penalised by waiting days. The proposals in the Green Paper as it stands are the only fair way forward for Statutory Sick Pay.'
How serious is the problem for employees?
The TUC has two concerns. Firstly, employees must have information about their sick pay, just as they would about their other pay. They must be able to tell whether they have been paid sick pay, and if they have not, the employer's reasons for this decision. This information is necessary for appeals to HMRC about employers' decisions not to pay SSP (if the ability to appeal to HMRC were to be withdrawn these dispute would instead have to be revolved through a tribunal/court.) We further address this issue in the next section.
Secondly, records of periods of absence of more than four days must be maintained to enable workers to link periods of absence to form a single period of incapacity for work. If workers could not do this, then employees with recurring conditions and conditions requiring repeated absences for treatment would face significant loss of SSP because they would repeatedly have to pass through the waiting days. It is difficult to see how these employees could be protected without records of the sort employers are currently obliged to keep.
Many or most of the workers who would lose out because they were no longer able to link periods of absence would be disabled people for the purposes of the Disability Discrimination Act. Fear that, as disabled people, they might lose entitlement to any income if they needed time of for treatment or suffered a relapse would act as a severe barrier to employment for non-employed disabled people.
The DWP Work Welfare and Equality Group's disability equality action plan states, 'we will ensure that new legislation such as the welfare reform bill has undertaken robust disability impact assessment.' (http://www.dwp.gov.uk/aboutus /equalityschemes/es-pdfs/dwp/dwp-full.pdf p 234) This plan is a requirement of the Disability Equality Duty, and compliance will be monitored by the Disability Rights Commission till October and the Commission on Equality and Human Rights thereafter; the TUC doubts whether the elimination of the linking rules would survive a 'robust disability impact assessment.'
How serious is the problem for employers?
The TUC does not believe that most employers consider the information requirements related to Statutory Sick Pay as a serious burden; it is rarely raised in discussions between employers and unions in negotiations and consultations, and individual employers never mention it in the course of our more informal contacts.
The DWP's Administrative Burdens Measurements Exercise looked at two information obligations relating to SSP:
Provide, on request of an employee, a written statement regarding Statutory Sick Pay leave which details: the number of days the employer is liable to pay, or not to pay, Statutory Sick Pay to the employee; reasons why Statutory Sick Pay is not payable for certain days.
Maintain - for each employee, for three years - records of sick absence of four or more consecutive days, and details of payments of Statutory Sick Pay.
The first of these obligations was estimated as representing a net cost to employers of £12 million. The exercise estimated that employees actually requested a statement 30,000 times a year, producing a very high figure for the unit cost of this obligation: £439. The TUC is willing to discuss practical ways in which this cost could be reduced, but employers who did not maintain the records necessary to produce such statements would find it much more difficult to defend themselves against claims that employees had not been paid the Statutory Sick Pay to which they were entitled. The absence of such records would make it more likely that disputes would be lengthy, complicated and eventually result in litigation; this is an obligation that benefits the employer as much as the employee. Indeed, union members would be less likely than other workers to be adversely affected, as this is precisely the sort of situation in which unions prove their worth to individual members; the workers who would tend to lose out would be those in unorganised industries and occupations, who are disproportionately likely to be the poorest and most vulnerable.
The second obligation was costed at £44m a year by the ABME. This is not a small sum, but it is one that falls to all 1.1 million employers, and so works out at £40 a year per employer. In an economy with total annual turnover in 2005 of more than £2.4 trillion this is a small share. (Annual Business Inquiry provisional data)
The ABME estimated a 'unit cost' for this second obligation of £11, but this is based on 'frequency of requirement', which we would argue is a misleading basis: the record of absences guarantees entitlements for all employees, and a better measurement would be the cost per worker thus protected. As there are currently 25 million employees, the cost per worker per year is £1.76; this is less than 0.01% of median gross earnings - close enough to zero to be within the statistical margin of error. (ASHE data) Another way of conceptualising the cost is that it is 3p per worker per week.
Promoting health at the workplace
The TUC strongly supports workplace health promotion, and we would certainly be willing to discuss possible reforms such as the use of the percentage threshold scheme to pay for different forms of support, such as extra support for occupational health or vocational rehabilitation. It might also be possible to offer rehabilitation or other support to workers who had spent more than, say, six weeks on Statutory Sick Pay.
Conclusion
The TUC believes that the information obligations associated with Statutory Sick Pay are not burdensome, and that there are serious risks that removing some information obligations could stop workers being able to link periods of absence. This would leave them subject to repeated loss of SSP, which could act as a welfare-to-work obstacle and would probably have a disproportionate impact on disabled people.
Annex: an information problem
Statements about sick pay are often misleading because they are based on claims that a large majority of employees are eligible for occupational sick pay. This is wrong: there are no reliable figures for the proportion of workers who do or do not receive occupational sick pay. It is certainly possible to work out the proportion of workers employed by organisations that have occupational sick pay schemes, but it is still common for such schemes to exclude temporary workers or employees in lower grades and it is common for them to exclude newly recruited staff.
12 January 2007
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