Improving Statutory Sick Pay could help tackle the UK’s economic inactivity challenge

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Someone off ill.

The House of Commons Work and Pensions Select Committee has today published its latest report, which calls for reforms to Statutory Sick Pay (SSP). I was up at the crack of dawn speaking with Will Bain on the BBC 5 Live’s Wake Up To Money about the report and its recommendations, which if delivered, could provide significant support to those on low and precarious incomes, and help tackle the economic inactivity challenge that the UK currently faces.

The current state of play

Statutory Sick Pay is the minimum amount of sick pay an employee is entitled to receive from their employer when they are absent from work due to illness. But the system in the UK has a number of significant flaws.

Firstly, the levels of sick pay on offer are too low. The UK has one of the lowest SSP levels amongst the richest nations in the OECD, at just under £110 a week for up to 28 weeks. And recent rises that have been introduced have barely kept pace with inflation.

Secondly, not everyone can access it. Only those earning above a ‘lower earnings threshold’ of £123 a week are eligible for SSP in the UK. This especially impacts those on low pay or who might be working more than one job. Likewise, those who are solo self-employed are by definition unable to access SSP – including many in precarious forms of work. Work Foundation analysis suggests that as a result of this 1.1 million people in severely insecure work are ineligible under the current system.

Thirdly, it takes too long to receive it. Currently you have to be sick for four consecutive days before you are entitled to access sick pay. It means many on low pay in particular miss out and end up continuing to work even if they are unwell.

Taken together these factors mean many workers who can’t afford to get by during periods without pay face a stark choice when they become ill. Either they soldier on while unwell, likely impacting their own wellbeing, productivity and even those of their colleagues if they’re suffering from something contagious; or, in the worst case scenarios, they leave the labour market altogether to access longer term benefits.

The Work and Pensions Select Committee’s report recognises each of these challenges and recommends action be taken to address them. On sick pay levels, it recommends that they rise by around £60 per week to £172.48 – in line with the level of statutory maternity payments. On widening access, the Committee recommends scrapping the ‘lower earnings threshold’ altogether, and the creation of a separate contributory sick pay scheme for self-employed people.

When it comes to the waiting times involved in receiving SSP, the Committee decided against recommending changes due to the unpredictable outcomes of doing so, and instead proposes the measure be kept under periodic review.

Why does SSP reform matter?

Although it remains to be seen whether the level of uplift in the rate of SSP proposed by the Committee would be sufficient to support those who need it most, the recommendations in the report do broadly represent positive steps in the right direction. As well as strengthening a key safety net for those on low incomes and in precarious forms of work, the reforms could also help tackle the UK’s economic inactivity challenge.

There are currently over 2.7 million people in the UK today who have opted out of the labour market all together as a result of ill health, contributing to worker shortages in particular sectors, constraining economic growth and increasing an already rising benefits bill to the Treasury.

Raising the level of SSP and improving access to it would help de-risk returning to employment for those with long term or fluctuating conditions, and could be an important safeguard to help more people who are in work but struggling with their health to remain in a job.

Nevertheless, there will be those who argue that making these changes would present an unacceptable cost to employers. To those concerns, the Committee rightly suggests engagement with employers is key in the delivery of these reforms, that financial support from Government for small and medium sized enterprises in the shape of a rebate should be on the table.

But the bigger reality here is that without action to strengthen the systems that provide support to those who become ill to remain in or return to work, the UK labour market will continue to be blighted by this challenge. There is more for Government to do in terms of improving employment support, reforming the welfare system and driving up the quality and flexibility of jobs on offer. But there is a significant role for employers to play too – and this is one way in which they can step up.

Read the Work Foundation’s submission to the Committee’s inquiry

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