‘Improving Lives – the Work, Health and Disability Green Paper’ consultation - reform of Statutory Sick Pay

As part of the recently published ‘Improving Lives – the Work, Health and Disability Green Paper’[1], the Department for Work and Pensions, and the Department of Health, are consulting on proposals to reform the Statutory Sick Pay system - so that it better encourages supportive conversations and phased, sustainable returns to work.

Key facts
·  Statutory Sick Pay is payable by the employer to the employee at a rate of £88.45 per week (employers may also decide to pay employees their own occupational sick pay)

·  Statutory Sick Pay is paid from the fourth consecutive day of absence for up to 28 weeks from a particular employer in any one period of entitlement

·   To qualify employees must meet the following qualifying criteria
o   have done some work under their contract of service
o   be incapable of work for at least four or more days in a row.
o   have average weekly earnings at least £112 per week (the Lower Earnings Limit) 

·  If an employee has been off work for more than seven days the employer is entitled to seek  ‘reasonable  evidence of the employee's incapacity for work

For consideration

Currently, Statutory Sick Pay is paid by employers only when a person does no work at all, meaning either that:
o  employees may be discouraged from a taking a phased return to work as they won’t qualify for statutory sick pay; or
o  that they may return to their usual hours too early, potentially leading to further absence or falling out of work altogether.

A potential reform would be to allow phased returns so that where an employee would earn less than Statutory Sick Pay in returning on their reduced hours, the employer would be able to ‘top up’ their wages to the Statutory Sick Pay level (or above, depending on the model). Among Employment and Support Allowance claimants with a recent history of working and expecting to return to work in the future, most (73%) felt that flexible or part-time working options would make a return to work easier[2].  

Phased return to work models
The green paper consults on two potential models:

A)   The ‘flat rate’ model
Ibrahim works 25 hours a week for £7.20 per hour or £180.00 per week.
At the moment, if Ibrahim went on a period of sickness absence he would need to return to work for at least 13 hours in order to compensate for the loss of £88.45 in Statutory Sick Pay (13 hours x £7.20 = £93.60).

Under the ‘flat rate’ model, if Ibrahim and his employer came to an agreement that a partial return to work could help aid his recovery, and that he could work a total of 6 hours over 2 days for a few weeks, the employer would ‘top up’ his salary to the Statutory Sick Pay level. So, Ibrahim would be paid £43.20 in wages (£7.20 x 6 hours), plus £45.25 in Statutory Sick Pay, to ‘top up’ to the Statutory Sick Pay rate of £88.45 per week. Ibrahim is able to ease back into work without losing financially, and his employer has the value of Ibrahim’s work. 

B)   The ‘pro rata’ model
Jenny works part time for 25 hours for £7.20 per hour, or £180.00 per week.  After 4 weeks on the Statutory Sick Pay rate of £88.45 she would like to come back for ten hours over 4 days for a couple of weeks as she recovers. At the moment that would mean she would only get £72.00 in wages, with no Statutory Sick Pay, and so she would be financially better off staying off work. 
Under the ‘pro rata’ model, Jenny would get £72.00 in wages (40% of her weekly wage, as she is working 40% of her usual hours), plus £53.00 of Statutory Sick Pay (60% of the £88.45 weekly rate), and it would be worth her while financially. From her employer’s point of view, she could either be paying £88.45 in Statutory Sick Pay whilst Jenny is on sick leave, or pay a total of £125