Sick pay – awaiting a fair and equitable policy

Policy discussions around sick pay understandably focus largely on its importance as a source of income security. Its significance to worker health as a consequence is frequently insufficiently recognised. Yet international evidence highlights its importance in this regard, showing that the threat of income loss when ill leads workers to delay medical care, fail to attend hospital appointments, and attend work when ill, thereby potentially contaminating work colleagues. Then, of course, there are the adverse physical and psychological effects flowing simply from a shortage of money when absent from work.

The current system of Statutory Sick Pay (SSP) could have been deliberately designed to ensure such outcomes. Under it, those eligible receive a weekly payment of just £116.75 a week. On top of this, no payment is made for the first three days of absence and those earning below the Lower Earnings Limit (£123) are excluded from coverage. As a result, the system   compares shockingly badly with sick pay arrangements in virtually all developed economies.

In response to this situation, the Labour Party’s Plan to Make Work Pay states that a Labour government would act to strengthen SSP. It also more specifically makes reference to removing the LEL and the three-day waiting period and ensuring that ‘the new system provides fair earnings replacement for people earning below the current rate of statutory sick pay.’ Sadly, however, nothing is said about ensuring that the SSP system provides fair earnings-replacement for all those covered by it.

Workers reliant on SSP are, then, set to continue to suffer significant financial penalties when off work sick. A 2021 Fabian Society report by Andrew Harrop, for example, noted that while SSP represents just 18 percent of average earnings, in many countries, including the Netherlands, Finland, Austria, Sweden, Norway and Spain, including sick pay or sickness benefits replace between 70 percent and 100 percent. Furthermore, given the flat rate nature of SSP, recipients will continue to vary enormously in terms of the proportion of earnings it replaces. This inequity in turn will continue to sit alongside another source of inequity, namely marked variations in both the coverage of occupational sick pay schemes operated by employers and the entitlements provided under them. A form of voluntarism which results in significant differences in sick pay entitlements between public and private sector workers, those working full- and part-time, and higher and lower earners, as well as those with differing lengths of service and employed in large and small organisations. For example, the Fabian Society report suggests that around 50 percent of employees of small employers rely on SSP alone compared with 24 percent of those working for large ones.

In short, the proposals relating to SSP in Labour’s Plan to Make Work Pay would improve the current SSP system in at least two important respects. At the same time, these reforms would clearly not fully address the unacceptable nature of sick pay arrangements in Britain. The minimum rights to sick pay of British workers will therefore remain among the worst in the developed world, with far too many facing unacceptable trade-offs between their income and their health when ill. That is unless a future Labour government choose instead to do what was proposed in the earlier New Deal for Working people and increase SSP with a view to ‘ensuring that we never again face a situation where workers have to choose between their health and financial hardship.’