Review of Statutory Sick Pay - Only minor improvements recommended

1 November 2007

In January 2006, the Department for Work and Pensions (DWP) published a Green Paper entitled A new deal for welfare: Empowering people to work and sought comments from interested parties. It included proposals for the simplification of Statutory Sick Pay (SSP), including the removal of the three waiting days, removal of the linking rules that apply when people change employment and the removal of the Percentage Threshold Scheme, which allows employers to recover some of their SSP payments in certain circumstances.

In June 2006, the DWP published a summary of consultation responses and, due in particular to the concerns of employer groups about the cost and effect on sickness absence of paying SSP for the first three days of sickness, concluded that it was not sensible to proceed with any reform at that time. However, it was announced that discussions with employer and employee representatives would continue to explore alternative approaches to simplification.

In December 2006, the DWP published its Simplification Plan 2006-07, a series of measures aimed at reducing the regulatory burden on its own staff, employers and individuals. (www.dwp.gov.uk/aboutus/better_regulation/simplification_plan.pdf) Forty different proposals were explained, including reviews of Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP). The requirement for employers to maintain records of sickness absence for four or more consecutive days, for each employee for three years, was shown as imposing the greatest burden of all of the obligations under consideration.

The DWP also announced that a further review of SSP had already begun, with the SSP Review Working Group holding their first meeting on 7 November 2006. The restrictions placed on the simplification review by its terms of reference were that its recommendations should:

give due regard to the DWP agenda,

not impose unreasonable costs on employers or additional costs to Government, and

demonstrate fairness for all employee groups.

The review was carried out between November 2006 and July 2007. The final report was published on 25 October 2007, along with an announcement of the Government's future intentions.

The conclusions and recommendations of the Report, in summary, are as follows:

it was not possible to devise a significantly altered or replacement scheme that would meet the terms of reference

the current scheme achieves a careful balance between benefits for employers and employees and the arguments for disturbing that balance are not strong enough to warrant changes

the rules requiring employers to link together spells of sickness with different employers to calculate the maximum period of entitlement to SSP (including the use of form SSP1L) are little used and should be removed

no straightforward changes to the main 3-day linking rule could be identified and any solution that involves re-serving waiting days is not acceptable to employees' representatives

any formal scheme to enable employers to opt-out of SSP by providing an occupational sick pay (OSP) scheme that is at least equivalent to SSP and that provides protection for all employees would be as complex as SSP itself

the introduction of Employment Support Allowance (ESA) to replace Incapacity Benefit from Autumn 2008, with a rate that does not depend on the length of sickness absence, will remove (for new cases) the information that employees currently have to provide on form SSP1 when entitlement to SSP runs out

the reduction in information provision resulting from the introduction of ESA will allow more employers with good OSP schemes to opt-out of SSP under current rules - parallel records would no longer be needed, only a record of absences of four days or more

although the Percentage Threshold Scheme (PTS) is complex and expensive to administer and it is believed that as few as 10% of small employers actually use the scheme, it is the only direct subsidy available to small employers and no agreement could be reached on how to remove the scheme

medical certificates should be reformed to provide information about an employee's capacity for work rather than reasons to refrain from work

the Government should provide access, particularly for small employers, to guidance on absence management procedures.

In a letter to the Working Group, Lord McKenzie, Parliamentary Under Secretary of State (Lords), accepted all but one of the recommendations. The recommendations relating to the requirements for employers to provide information for benefits purposes will be introduced to coincide with the introduction of Employment Support Allowance in October 2008, subject to Parliamentary approval. A review of the medical certificate has already begun and the Working Group's views will be taken into consideration.

The Government is not persuaded, however, of the value and benefit of the Percentage Threshold Scheme, believing that it does nothing to help employers reduce and effectively manage sickness absence. Consideration will be given on how to replace it with alternative methods of supporting employers.

...UK Payroll News - Latest

Source:
Statutory Sick Pay review working group - final report
Lord McKenzie's response to the report

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