Britain’s 1.3mn workers on the lowest incomes will be eligible for sickness payments from their employers for the first time, set at 80 per cent of usual pay, under plans to be formally presented by ministers later this week.
The changes are to be part of a sequence of tweaks to the employment rights bill — a package of legislation that was a key promise in Labour’s election manifesto and will cost businesses billions of pounds a year.
Ministers have long promised to strengthen statutory sick pay (SSP), for which workers earning less than £123 a week have previously not been eligible.
For other workers, there is a rate of £116.75 a week, which kicks in only after three days of sickness. From April, this rate will rise to £118.75 a week.
Under the changes, all workers will be eligible for the payments from day one of sickness, while those taking home less than £123 a week will receive them for the first time.
In a recent consultation the government proposed that bosses would have to pay 60 per cent, 70 per cent or 80 per cent of usual pay to those on the lowest incomes.
Ahead of the bill returning to parliament this week for its report stage, ministers have plumped for the most generous of these options. The decision means low-paid workers will receive whichever is lowest out of the 80 per cent of average weekly earnings or the universal rate.
“The move will mean some of the lowest earners are expected to be up to £100 better off per week, compared to the current system,” the government said.
But that extra money will all be paid for by companies, which have voiced concerns about the scope of the government’s workplace reforms on the back of increases in employer national insurance contributions and the minimum wage.
The government’s own impact assessment of the legislation — which also includes a ban on “exploitative” zero-hours contracts, day-one rights against unfair dismissal and new rights for unions to access workplaces — estimated an annual cost of up to £5bn a year to British businesses.
Work and pensions secretary Liz Kendall told The Guardian that the “landmark change” would mean people would no longer have to choose between their health and earning a living.
“For too long, sick workers have had to decide between staying at home and losing a day’s pay or soldiering on at their own risk just to make ends meet,” she said.
However, Alex Hall-Chen, principal policy adviser at the Institute of Directors, said the reforms would “significantly increase the cost and risk of employing staff”, adding that a 60 per cent rate would “strike the right balance” between supporting people on low incomes and affecting business.
Other business groups have said they are less concerned about the 80 per cent rate of SSP for low earners than the entitlement of Britain’s entire workforce to sick pay from the first day of absence.
Jane Gratton, deputy director of public policy at the British Chambers of Commerce, called the 80 per cent rate “a fair and reasonable compromise”.
But she cautioned that companies were concerned the day-one entitlement “could lead to an increase in staff absenteeism that will be difficult for small and medium-sized enterprises to accommodate”.
The Federation of Small Businesses has been calling for the government to offer a rebate, as it did during the pandemic, for small employers that find it harder to cover the cost of SSP and are less likely to have their own policies offering more than the basic statutory protection.
But Paul Nowak, general secretary of the Trades Union Congress, the umbrella body for the UK labour movement, said he hoped the government would eventually lift the replacement rate even higher.
“This shouldn’t be the end of the story,” he said.
The TUC had called for low earners to be eligible for at least their usual earnings, noting that a minority of workers would take a financial hit under the government’s proposals if they were ill for very long periods.