Owner Kate Upcraft Consultancy Ltd
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Sick pay needs a review

4th Nov 2016
Owner Kate Upcraft Consultancy Ltd
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sick pay
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Kate Upcraft has some suggestions for reforming statutory sick pay, starting with the name.

Green paper

The Department for Work and Pensions and the Department of Health have jointly issued a hefty Green Paper on Work, Health and Disability. It is awash with proposals, case studies and statistics that aim to get people off state benefits and back into the workplace, or to paraphrase “cut the benefits bill by making sure wages replace benefits”.

Buried within the document though are some significant proposals that will affect employers and agents:

  • A review of Statutory Sick Pay (SSP) to be completed by the end of this parliament;
  • The improvement and extension of the use of Fit Note recommendations to encourage early return to work;
  • A proposal to allow other medical professionals to issue Fit Notes; and
  • Discussions with insurance industry to establish validity of developing Group Income Protection products for smaller employers.

Overhaul needed

Although employers don’t have the time to work through a full scale review of SSP given the current volume of change they are facing, I agree that the SSP legislation and guidance does need an overhaul.

Rebrand?

I would begin by changing the name to National Minimum Sick Pay. This would reflect its purpose more clearly, as SSP is now just a minimum level of occupational sick pay. No employer has been able to recover SSP since April 2014. Keeping the word ‘statutory’ in the title leads employees to think that the government is funding most of the payment as it does for the other statutory payments. A rebranding of SSP may make employees appreciate the payment.

Clarity

Given the rise in the ‘gig’ economy and the number of individuals likely to be reclassified as  

workers after the Uber tribunal ruling, we need clarity as to whether sick pay will be due for these individuals on their deemed earnings. There are also SSP issues connected to the IR35 public sector ‘off payroll’ proposals due to apply from 6 April 2017.

Medical treatment

When talking to employers and tax agents I am still surprised by how few know about the Fit for Work medical treatment tax exemption that was introduced in January 2015. This was linked to the introduction of the Fit for Work Service, which is also heavily featured in the Green Paper.

Where a medical professional recommends medical treatment that would facilitate a return to work for someone who has a short term (up to three months) condition that is preventing them working, the employer can pay for medical treatment to the value of £500 per person per year with no benefit-in-kind implication.

The treatment can be for a mental or physical condition and the reimbursement can, unusually, be via expenses if the employee asks for reimbursement where he or she has paid for treatment. Alternatively, the cost of the treatment may be paid by invoice direct to the employer or by the employer settling an invoice provided to the employee. Each of these options would have a different tax and NI impact for a traditional benefit in kind.

Conclusion

It’s good to see that employers are seen as key stakeholders in this area. I hope there will be consultation with payroll professionals, as well as the HR representative bodies, as these proposals develop. Also that sufficient time is given to ensure all parties can make the best use of this opportunity to review this complex area of legislation. 

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Replies (9)

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By Michael C Feltham
09th Nov 2016 11:39

Re-Branding?

Loafers' Leave?

Hang Over Pay?

I fancy a quick holiday Pay?

It's that time of the month Pay?

Man-flue Pay?

The choice is endless!

Thanks (1)
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By ngretton
09th Nov 2016 11:45

Hi Kate, you promised "some suggestions for reforming SSP, starting with name". Name change is good idea, and yes we'd like clarity re Uber & IR35. But I'm not seeing any substantive suggestions. I would have liked to have heard if you think the minimum rate of ~£17 per day is fair? Does the assumption of weekly pay still work? Does the 3 day wait or the 28 week max make any sense to anyone?

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By winton50
09th Nov 2016 12:38

If there's no BIK on return to work medical payments does this mean that they are also allowable against corp tax as a business expense?

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Stepurhan
By stepurhan
09th Nov 2016 14:30

Why rebrand? I really don't see the benefit of the change, and there will be significant costs involved. Any idea how many documents contain references to statutory sick pay that would require changing? It is pay for being sick, and it is defined by statute, so the description seems fine.

I await your other suggestions. Saying we need clarity on the gig economy, whilst true, is not a suggestion for reform.

Mentioning the existing Fit work exemption is useful information, but it is also not a suggestion. It is also that worst sort of useful information, partial information. You say that each of the options for payment have different tax and NI impact, but you don't make it clear what those different implications are. Different to each other, or different to a straight BIK (and how either way). The linked article doesn't explain any differences either. Clarity needed.

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By eamonn
10th Nov 2016 12:46

Current rules dont aid phased return to work specifically the requirement to qualify for SSP an employee needs to have four consecutive calendar days of sickness for a PIW. So to preserve SSP entitlement care has to be atken about what days the employee works.

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By AndrewV12
14th Nov 2016 12:34

There is a lot in there I did not know, George Osborn sneaks theses things into his budget and before you know it, theres a wall of new legalisation to understand.

A proposal to allow other medical professionals to issue Fit Notes;
No employer has been able to recover SSP since April 2014.
..........

Also SSP is not very generous 'The weekly rate for Statutory Sick Pay (SSP) is £88.45 for up to 28 weeks. It is paid':

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Replying to AndrewV12:
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By bwz999
21st Nov 2016 22:15

Seems pretty generous to me if it comes out of the pocket of a small employer who only has 1 or 2 employees and doesn't make much profit. What is NI for if its not to insure against sickness?

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By Ian McTernan CTA
14th Nov 2016 13:33

The name is completely wrong.

It should be named something like 'Employer Paid Sick Pay' so employee are under no illusion who is paying for it. I bet if you asked employees who pays SSP most would think the Govt does.

Most companies tend to pay more than the minimum where absences are short or infrequent.

I'd redraw it so that the minimum payment is no less than the minimum wage per hour but have much tighter controls on employees who seek to exploit the system, like Southern Rail conductors (1066 days of 'sickness' in 32 days). Allow employers to institute disciplinary proceedings where it is suspected employees are gaming the system, and put a hard stop on it at 10 days per annum after which employees will be sent to an independent doctor for advice on how to improve their sickness level and see what help the employee needs. Stop payments where it is exploited and dock holiday entitlement.

Of course, the Unions won't agree to any of the above and will no doubt call a strike if you tried to get it through at Southern Rail.

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By Kate Upcraft
17th Nov 2016 13:26

Thanks for the comments, sadly I'm only given a small word count for these articles so whilst I could write a book about SSP, accounting web wouldn't be able to publish it and you wouldn't have time to read it! So to address your thoughts (briefly)
I am aware that SSP appears in lots of places but it's never stopeped the government rebranding anything before such as sick notes becoming fit notes, additional statutory paternity pay changing to shared parental pay soon after we'd implemyed it. My suggestion of national minimum sick pay simply describes what it is and distinguishes it from state funded statutory payments so employees value it as still paid by their employer. I think the rate provides an adequate earnings replacement taking into account cost pressures for businesses for employees already in respect of national living wage, auto enrolment and apprenticeship levy. I think there is merit still in waiting days and linking to limit liability and manage the cost of isolated days of absence but feel we need to look at phased return not interfering with SSP as we do with KIT and SPLIT days.
The medical treatment exemption means there is no BIK however the employee receives reimbursement i.e. By the employer paying the invoice or a cash reimbursement, whereas for other BIKs who makes the contract and pays the supplier dictates if section M or B of the P11d are in point or for a cash reimbursement via the payroll for tax and NI now that section N has been abolished for 16/17

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