Sickness policy reform would help SMEs thrive - Charlotte Walker

You could be forgiven for not knowing that this is National Payroll Week, where we celebrate the positive impact of payroll professionals across the UK. While it may not be widely observed, this occasion provides an important focus on the value of the strategic decision-making that people in my field of work provide for employers around the increasingly important issues of reward and remuneration within the workplace.

Amid the extensive list of payroll-related challenges, one that has become a growing concern for many UK businesses and organisations is the issue of long-term sick leave. Last year, a record 185m working days were lost in the UK due to sickness or injury, and 2.5m people were classified as unemployed due to long-term absenteeism.

Under current UK Government rules, statutory sick pay (SSP) entitlement of £109.40 per week is available to any employee on long-term sick leave provided they earned an average of £123 per week whilst working. Long- term sick leave refers to an absence lasting more than four weeks. SSP can be claimed for up to 28 weeks.

While SSP provides a safeguard for those who are unable to work, it also places a significant financial burden on employers. I hear concerns about the high costs of having to hire agency workers, which is typically more costly than permanent staff, to cover during periods of long-term absenteeism. Filling the gap using existing staff also comes with extra costs including rising overtime claims and, in many cases, lost productivity as further training is required.

Charlotte Walker is an Associate and payroll specialist at accountants CT

Another unexpected cost to employers is holiday pay as employees continue to accrue holidays whilst on long-term sick leave, and can carry forward four weeks of entitlement into the next 18 months.

These additional financial burdens along with the ongoing SSP costs that are met by the employer, presents a threat to the viability of many businesses, especially smaller SMEs.

At a time where the UK Government should be supporting businesses to drive forward a currently sluggish UK economy, a review of SSP policy seems inherently sensible.

One potentially effective idea would be to match SSP rates with the current statutory maternity payrates, where 90 per cent of earnings are paid for the first six weeks followed by a rate of £172.48 per week (or 90 per cent of earnings if that is lower). Offering the same government subsidy recovery of 103 per cent for small employers and 92 per cent for large employers would alleviate some of the long-term absenteeism costs that are increasingly hurting many businesses.

The UK Government could also consider bringing SSP in line with the national minimum wage, and enable a part of this amount to be recoverable.

In the meantime, as we mark National Payroll Week there are specific measures that employers can also consider to promote a healthier workforce and mitigate the impact of long-term sickness. This includes implementing policies requiring staff to make a full recovery before attempting a return to the workplace to reduce the threat of further absences due to a reoccurring health condition. Supportive back-to-work conversations with employees who have returned from sick leave can also lead to better long-term outcomes and lower absenteeism.

Proactive check-ins with employees in the workplace, to ensure they are keeping good health, along with flexible working practices can also make a positive impact.

Charlotte Walker is an Associate and payroll specialist at accountants CT