ERB Series: Small but significant changes to the statutory sick pay system

As part of the government’s plan to “Make Work Pay”, it identified two key changes to the current statutory sick pay (SSP) system to increase access to sick pay for employees, Ashley Powis explores the proposed changes as set out in the Employment Rights Bill and their implications for employers.

Present position and proposed reforms

Presently we have in place a statutory sick pay (SSP) system whereby payments are made at a flat rate to employees who are unable to work due to illness, provided the employee meets the necessary earning requirements and the absence lasts longer than 3 days, with the employer being responsible for management of their system and responsibility for the entirety of the payment.

Via the Employment Rights Bill (the Bill), which was introduced to Parliament on 10 October 2024, the government has proposed to:

1. Remove the Lower Earnings Limit, and
2. Remove the three day waiting period.

Consultation concerning these proposals ran from 21 October until 4 December 2024; the government’s response to the consultation is still awaited.

What is the present position and what are the proposed changes?

SSP is the minimum statutory payment an employee is entitled to receive for periods where they are unable to work due to illness. The current rate of SSP for those that qualify is £116.75 per week and is payable for up to 28 weeks per period of sickness absence.

What are the key changes that the government intends to implement?

• Currently, SSP is not payable for the first 3 ‘qualifying days’ (days on which an employee is contracted or scheduled to work) of a sickness absence, these are referred to as ‘waiting days’.
  • Under the Bill, SSP will be payable from day one of a sickness absence, and ‘waiting days’ will be removed.
• Currently, SSP is also not payable to those who earn less than the Lower Earnings Limit (currently £123 per week).
  • The Bill removes the Lower Earnings Limit meaning that all employees who are otherwise eligible for SSP, regardless of their earnings, will receive sick pay when they need to take time off work due to illness.

Additionally, the rate at which SSP is paid will change. It will be set at the lower of either the set SSP flat rate or, where an employee earns less than the SSP flat rate, a specified percentage of their weekly earnings. The government sought views on what that percentage should in the recent consultation, and we await its response to that consultation in the coming weeks.

Why are the changes being made?

Ultimately, the changes will allow more employees to access SSP. With employees not having to choose between their health and potential financial hardship. Within the consultation documentation, the government refers to the removal of waiting period having the following benefits:

“Enabling employees to take the time off they need to recover from short-term illnesses can reduce the overall rate of sickness absence, increase business productivity, and help protect our health system…

Employees with long-term health conditions will sometimes require time off work to manage their condition to prevent it from worsening. It is important that people feel supported to manage their condition whilst remaining part of the labour market…

Removing the waiting period can also better support flexible return arrangements following illness, as SSP will be payable from the first day of incapacity. Employees who feel supported by their employer in sickness as well as health are likely to remain in their roles for longer, reducing business spending on recruiting and upskilling members of staff.”

The government estimates that up to 1.3 million employees earn less than the current Lower Earnings Limit. Through its removal, those in lower paid jobs including some part time workers will benefit, which is expected to particularly benefit female workers and younger workers.

What does this mean for employers?

While the changes are clearly going to have a positive impact for lower-paid employees and, in the government’s view, will also have some positive effects for employers, they do entail greater costs for employers, who bear the responsibility for the entirety of the payment. Although it is unclear how great an impact these SSP changes will have, in its consultation paper the government estimated that they will represent a ‘very small proportion increase’, of around 0.03% in total spending on wages.

Many employers presently offer enhanced “company sick pay” or “contractual sick pay” schemes. It is of course worth reviewing any enhanced schemes in place to understand how the proposed changes may impact on what you offer within your organisation.

Sick leave and pay policies will certainly need to be reviewed and revised to take account of these changes once they are finalised and come into effect. We will, of course, keep you posted when these later steps happen.

See our previous ERB Insights in this series

• Overview: ERB What’s In, What’s Out, What’s Next? (11 October 2024)
• ERB: Flexible Working: Further Flexion (21 October 2024)
• ERB: Day 1 right to claim unfair dismissal (25 October 2024)
• ERB: The Pendulum Swings on Industrial Relations (8 November 2024)
• ERB: The Fair Work Agency (15 November 2024)
• ERB: Dismissal and re-engagement - tying the hands of employers? (22 November 2024)
• ERB: Further rules on fair tipping (3 December 2024)
• ERB: First set of proposed amendments: what it means and what to expect (6 December 2024)