Sick pay needs a review
Kate Upcraft has some suggestions for reforming statutory sick pay, starting with the name.
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.
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.
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.
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.
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.
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.