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Tuesday, June 14, 2022
Insurer and employee benefit provider Unum has worked with WPI Economics to review and make recommendations for a revised system for supporting the well-being and health of the UK’s work force.
With Statutory Sick Pay turning 40 this year we review the recent findings by insurer and employee benefits provider Unum. In collaboration with WPI Economics they undertook an extensive review of the UK’s sickness benefit payments and processes.
For anyone who’s administered SSP for an organisation or been on the receiving end of calling on the benefit, the findings will not be surprising. In short, this recent report highlights the need for an urgent rethink and re- engineering of the existing system.
The proposed alternative from Unum suggests that the UK economy could get as much as a £3.9bn boost over the next five years. This return will require wholesale changes to the current system with the aim of seeing investment in the health and wellbeing in the UK’s workforce.
For 40 years we’ve managed sickness absence in the UK via Statutory Sick Pay (SSP), a minimum statutory payment made by employers to employees absent due to poor health. SSP was introduced in 1982 to replace state sickness benefit. At present (2022) eligible employees receive pay at a pro-rated rate of £99.35 per week for a period of up to 28 weeks.
In 2018 it was estimated that in the UK we lost around 140 million working days due to sickness. As far as calculating the number of employees receiving payments is by comparison small and not easy to accurately assess given employers are not obliged to record and report cases of sick payments to
employees. Additional barriers to access SSP include ‘waiting days’ lower earnings which immediately excludes 2 million workers.
Thanks to the modelling work of WPI Economics using their own detailed analysis and previous studies they evaluated that around 18 million ‘SSP-eligible days’ are taken by 6 million employees a year, with direct costs to employers of between £100 million to £250 million.
Most employees in receipt of SSP will realise a payment that is very low compared to their typical earnings. WPI refer to the SSP value as the ‘replacement rate’ i.e. the proportion of previous pay covered.
Since SSP’s introduction, the proportion of employers choosing to go beyond it and provide OSP has fallen, from 56% in 198840 to 28% in 2019.
The pandemic has only served to focus on how poor the deal has been for those in receipt of SSP. The equivalent gross hourly rate for those on SSP is only £2.76.
The UK sits at the wrong end of the league table when comparing other similar developed countries and the sick pay support offered to workers. Their solutions strive to prevent sharp falls in income that risk making a worker’s financial circumstances precarious.
The Chartered Institute of Personnel and Development (CIPD) recent survey into the impact of Covid-19 discovered that 23% of workers off work due to Coronavirus would struggle to pay bills or buy food within the first week of absence. When the time off extended to two weeks this response grew to a third (33%) of those surveyed.
Overall, the cost of the current system to the Exchequer are estimated to be around £850 million a year. It’s estimated that the direct and indirect costs of the current system including those forced into claiming Universal Credit, are greater for the government than for business.
Looking at the bigger picture and impact on the economy, data collated prior to the pandemic indicates that annual sickness absence carried a staggering cost to the UK’s productivity of £130 billion.
It’s also true to say that the current system does not effectively incentivise or support employers to invest in managing sickness absence.
Unum’s work on this important subject didn’t stop at the reveal of depressing data. The company has sought to address the shortfalls in the current through a proposal of system which moves away from a singular focus on the payments. We hinted at the returns for such a re-working of SSP in the opening section of this article, here below are the key elements proposed by Unum.
Statutory Sickness Support would address the current sick pay system by:
- widening eligibility, so all workers are protected;
- bringing the rules up to date, to accommodate flexible working;
- simplifying calculation and administration for employers; and
- strengthening the safety net to reduce ‘income shocks’ and alleviate poverty.Unum’s proposed reforms suggest they would boost the average ‘replacement rate’ (the proportion of salary covered by SSP) for workers on SSP from 28% of earnings under the current system to 63%, with most of the benefits going to workers earning less than £25,000 a year.
Alongside overhauling sick pay to better protect workers, Statutory Sickness Support can help employers with more guidance on how to prevent and manage employee sickness. Unum is calling on the Government to:
- provide targeted guidance and support for employers;
- introduce a new conditional sick pay rebate for small businesses who do the right thing; and launch a £500 million fund to deliver a ‘shot in the arm’ for SME investment in health at work.
Mark Till, CEO of Unum UK, added:
“Tackling sickness absence should be a top priority. Statutory Sick Pay is a 40-year-old system that’s really showing its age: it offers no protection at all for the lowest-paid workers and misses the opportunity to promote early intervention and empower employers to deliver the right support for their employees to stay in or get back to work. We call on the government to introduce Statutory Sickness Support to level up the health and wellbeing of Britain’s workforce and power the high-skilled growth our economy needs.”
Written by Robert Gibson, Senior Consultant - Employment Law
Robert is a Senior Consultant at Samuel Phillips and specialises in employment and business matters. He advises in relation to employment and shareholder disputes, including pensions and related issues.
