Going backwards: statutory sick pay after the pandemic – by Dr Lisa Rodgers

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1. Introduction

The coronavirus pandemic has seen unprecedented interference by governments in many aspects of our working lives. In terms of labour law, some of the changes made by the UK government during the pandemic have been deregulatory and served to erode protection for workers (for example, through increasing flexibility in working time for key workers: Working Time (Coronavirus) (Amendment) Regulations 2020. For the most part though, these changes have increased worker protection and provided significant support for UK businesses and employees. The two furlough schemes, the Coronavirus Job Retention Scheme (CJRS) and the accompanying Self-Employment Income Support Scheme have been widely judged as pandemic success stories, with the CJRS supporting 11.6 million people and playing a clear role in limiting job losses. Likewise, changes to the sick pay system during the pandemic have been positive, serving to increase access to the scheme and reduce the administrative burden on both employees and their employers.

However, this support was only ever envisaged as temporary and all these schemes have been or are in the process of being disbanded. Under the UK’s ‘Living with COVID-19’ report, published in February 2022, the government set out its deregulatory agenda, and its intention to replace ‘specific interventions for COVID-19 with public health measures and guidance’ (para 35). All self-isolation and testing requirements ended on 24 February 2022, and from 24 March the changes made to statutory sick pay were reversed. Furthermore, from 1 April, the recommendations regarding the use of COVID passes for gaining entry to entertainment venues will be scrapped and employers will no longer be required to specifically consider coronavirus as part of their health and safety risk assessments.

Irrespective of whether the risks from coronavirus have really disappeared to the extent suggested by the government, the complete reversal of all these coronavirus measures and lack of provision for their re-enactment is short-sighted and a missed opportunity. For example, the TUC has argued that the success of the furlough scheme is a perfect opportunity to consider legislation for permanent short term working, which should be a minimum safeguard for workers. In this blog, I consider the changes to the system of sick pay introduced in response to the coronavirus pandemic. I argue that, although these changes were not perfect, they did represent an important correction to an otherwise outdated and exclusionary system. Rather, this correction should have been seen as an opportunity to reconsider the provision of sick pay to ensure that it is set at a level which enables all workers to actually take sick leave when they need it.

2. The introduction of SSP: setting the tone

The modern scheme of statutory sick pay in the UK was introduced by the Social Security and Housing Benefits Act 1982 (SSHBA) (now the Social Security Contributions and Benefits Act 1992 (SSCBA)). At the time, sick pay was provided by the government as a social security benefit, available to those employees (or ‘employed earners’) with an adequate contribution record. The introduction of the SSHBA responded to the agenda of deregulation and privatisation pursued by the Conservative government of the 1980s. The Green paper which formed the background to the introduction of the SSHBA illustrates the government’s policy aims and ethos well (DHSS, Income During Sickness: A New Strategy, 1980, Cmnd 7684). First, the government wanted to save costs by moving to a sick pay system administered not by the government but by private employers. Second, the increase in private occupational sick pay schemes between employees and their employers provided evidence to the government that the administration of sick pay was not a government matter, but rather an activity which ‘firms and individuals can perform perfectly well for themselves’ (ibid para 22). Third, there was a concern that sick pay payments were too generous and were insufficiently taxed to the extent that ‘large numbers of employees [were] financially better off when sick than when at work’ ((Mr Prentice, HC Deb 02 April 1980 vol 982 cc254). This concern reflected a largely negative view of the provision of welfare payments, and indeed those workers who were forced to rely on them.

Worker protective concerns were largely absent from the reform agenda. Indeed, commentary on the Income During Sickness Green paper at the time highlighted the complete failure of the government to relate the reform of the system of sick pay to wider considerations of the protection of low paid workers. Not only that, but under the new system low paid workers would actually receive a cut in their income whilst off sick. Whilst under the old social security system employees qualifying for sickness benefit would receive the whole of that benefit, the new system tied sickness payments to earnings which would disproportionately affect low-paid workers. This treatment of low-paid workers was referred to at the time as ‘startling’ (T.M.P, ‘Income During Initial Sickness: a new Strategy’ (1980) 9 (1) 193-197, 196).

Arguably, this policy ethos has influenced the development of our sick pay system to the current day. Even though statutory sick pay is now provided very largely by employers (with the exception of some temporary rebates for SMEs), statutory sick pay appears to be viewed more as a social security benefit than a worker ‘right’. This has meant that statutory sick pay has not been a policy priority, the level of statutory sick pay has remained at rock-bottom level, and access to statutory sick pay is very restricted. This can be contrasted to the regulation of the National Minimum Wage. This ‘wage’ issue has been high on the policy agenda in recent years, and the government has made provision for significant increases in the level of the National Minimum Wage over time.

3. The cracks in the system

Even prior to the pandemic, the government recognised that there were problems with the system of statutory sick pay, and launched a consultation seeking to reform SSP ‘so that it is available to all employees that need it’. The consultation focused on four issues: (1) the problems with access to statutory sick pay for low-paid employees as a result of the lower-earnings limit (LEL); (2) the relationship between sick pay and phased returns to work; (3) supporting SME’s with sickness payments and (4) enforcement. This approach was by no means comprehensive and left a number of fundamental issues untouched, including the fact that SSP extends only to ‘employees’ rather than the wider category of ‘workers’. All of these issues will be discussed in the following section.

The LEL (currently set at the level of £120 per week) has been one of the most controversial elements of statutory sick pay because it has the effect of excluding the lowest-paid employees (and workers) from the system. According to TUC research conducted just prior to the pandemic, the LEL potentially excluded 1.9 million workers from receiving SSP when they have to take time off sick. This effect is felt disproportionately by casual workers and those on insecure contracts. For example, the TUC provided evidence that 34 per cent of those on zero-hours contracts would fail to meet the LEL, compared to only 6 per cent of permanent employees. The LEL also has a disproportionate effect on women. The government consultation revealed overwhelming support for extending SSP to those earning below the LEL (75 per cent). Both small and large employers supported this measure, and a number of respondents suggested that removing the LEL would have wider benefits in terms of incentivising employers to reduce sickness absence for all their employers. Despite this support, the government decided to take no action on reducing or removing the LEL.

Although the government raised the problems with the LEL in the consultation, it did not deal with the additional eligibility requirements which further restrict the access to low-paid workers to SSP. There is the problem of ‘waiting days’ before qualification for SSP: no SSP is payable for the first three days in any period of entitlement, and the calculation of ‘waiting’ and ‘qualifying’ days is unnecessarily complicated and difficult. Furthermore, SSP is only available to ‘employees’(s 151(1) SSCBA), and not the wider status category of ‘workers’. This means that atypical or casual workers can find it difficult to claim SSP, even if they do clear the earnings threshold (Spence v Revenue and Customs Commissioners [2012] UKFTT 213).

This position has been partially addressed by statutory provisions which ‘deem’ certain groups who would not normally qualify for employee status as employees. This is an eclectic group, including agency workers, office cleaners and people employed by their spouses and partners (Social Security (Categorisation of Earners) Regulations 1978/1689 Sch 1 paras 1-5A). There is also evidence of a sympathetic approach of the courts to status qualification. In the Court of Appeal case of Brown v Chief Adjudication Officer [1997] ICR 266, a worker employed on a series of daily contracts over a 9 month period was deemed to be an employee for these purposes. Indeed, on its website ACAS states that SSP does cover (agency, casual and zero-hour) workers ‘as long as they meet the eligibility requirements’. However, it should be pointed out that this latter assertion is rather misleading, given that the eligibility requirements still officially require workers to show ‘employee’ status.

The government consultation did identify further problems with the system of SSP. The consultation outlined the fact that SSP was a rather blunt instrument for dealing with sickness absence and return to work. For example, there is no provision for a tapering of SSP in line with phased returns to work, despite the prevalence of phased returns in practice. SMEs reported struggling to cover for sickness absence and provide adequate support for employees and enforcement of SSP was identified as difficult and costly. The government did not purport to deal with any of these issues specifically in its response to the consultation, although the system of labour law enforcement was already under separate review and SSP would be included in within that remit.

4. Sick pay in the pandemic

The advent of coronavirus dramatically changed the landscape of sickness absence. The introduction of mandatory self-isolation periods was significant. This mandatory self-isolation period was framed broadly, such that for the majority of the pandemic, workers were unable to attend work if they contracted the disease or if they came into close contact with any person who tested positive for the virus. For certain professions involving key workers who were still required to attend work, this had a significant effect on sickness absence.

Overall, however, sickness absence actually decreased during 2020. This was in part due to other government measures such as the furlough scheme and the increase in home working, but there was also the problem that workers (and particularly low-paid workers) simply could not afford to take time off. The low rates of SSP (£95.85 in 2020 and £96.35 today) represented an 80% pay cut for the average worker. Hence, those workers not covered by an occupational sick pay scheme and having to rely on SSP faced an impossible choice over whether or not to self-isolate or take sick leave. The outcome of this situation was inevitably that COVID rates were lower in those sectors or companies offering company sick pay compared to those which did not. More broadly, many key workers simply did not qualify for SSP as a result of the strict eligibility rules and the many exclusions which applied. Either their work pattern was too casual to allow them to attain ‘employee’ status, or they were classified as ‘self-employed’ and thereby excluded from the remit of SSP. Even those who did qualify still had to endure 3 ‘waiting days’ of sick leave before qualifying for any payment at all.

The government made some positive changes to the SSP scheme to encourage individuals to take sick leave. For COVID-related absences, SSP became a ‘day one right‘ from 13 March 2020. Furthermore, in September 2020 the government introduced a £500 Test and Trace Support Payment for individuals (or partners of individuals) in receipt of Universal Credit and Working Tax Credit and forced to self-isolate because of COVID-19. Other individuals on low incomes were also eligible for a £500 discretionary payment from their local authority. All these schemes represented a recognition of the low levels of SSP and the failures of the SSP system to reach those in need, although they were not without their problems. For example, the TUC reported that both the SSP supplement schemes were difficult to access, and demand for those schemes far out-stripped the funding provided by the government (10).

There were further schemes to assist individuals in claiming sick pay during the pandemic, although these were very temporary in nature. On 10 December 2021, the government made a change to the normal rules requiring provision of medical evidence for the purposes of sick pay. In order to free up GPs to help with the booster vaccine roll-out, the requirement to provide a doctor’s note or ‘fit note’ after seven days’ absence from work was suspended. From 7 days, employees could just provide evidence of the need to self-isolate, with the requirement for a fit note only coming into effect after 28 days’ absence. The government also made temporary provision for a rebate to SMEs to cover the first two weeks of sickness absence taken by employees for COVID-related reasons.

5. The SSP system going forward

All of the changes made to the sick pay scheme during the last two years were presented by the government as temporary measures, responding to the immediate concerns of the pandemic. By implication, it is assumed that as we move to the endemic stage of the virus, the changes can be reversed without loss to workers, employees or employers. Both of these contentions are false. The coronavirus pandemic simply brought to the surface the historic neglect of SSP and some of the many telling problems with its provision, problems which prevent many workers who need it from accessing it, and subjecting those who do access it to onerous and unnecessary procedural requirements. The pandemic also served to reveal that the level and construction of SSP acted as a very large disincentive to people in actually taking sick leave.

In fact, many of the ‘temporary’ changes responded to longer-term problems with the system of SSP. The system of ‘waiting days’ in the SSP is unnecessary and unfair and out of step with the move in other areas of employment law to the removal of qualification requirements and the promotion of day-one rights. The schemes to supplement SSP for low-income workers were an implicit recognition of the pitiful level of SSP. The procedural changes to the system of ‘fit notes’ responded to the difficulty for workers in accessing medical evidence in the context of a stretched public health system. None of these issues have disappeared even if the threat from COVID-19 itself has reduced.

Furthermore, the pandemic has served to highlight the patchy coverage of occupational sick pay schemes (3) and their employer-centric construction. Towards the end of the pandemic, the government introduced new rules cutting the self-isolation requirements for vaccinated individuals. By implication companies (temporarily) had to cover longer periods of sick leave for unvaccinated members of staff. In response to these cost pressures, a number of companies removed or reduced the entitlement for contractual sick pay for unvaccinated members of staff. Although some of these moves may have been illegal, in large part, the discretionary wording of many contractual sick pay clauses and careful (non-discriminatory) drafting of any amendments meant that companies were able to take this litigation risk, particularly in a very sympathetic public policy environment.

Rather, the changes made to SSP during the pandemic should be the starting point for wider reform. Removing the complex and unnecessary system of waiting days is essential, as is reassessing the procedural requirements for access to SSP. However, these moves only scratch the surface. There needs to be a fundamental reassessment of the rationale and policy ethos of the provision of SSP. This provision should be seen as ‘right’ or ‘entitlement’, rather than an inconvenient and unnecessary drain on government and employer resources. There needs to be a reassessment of the stringent and exclusionary eligibility requirements for SSP, which create confusion and mean that SSP does not reach those who really need it. At the very least, SSP needs to be available to all workers in line with working time and National Minimum Wage rights. Finally, SSP must be set at a level which means that workers who are sick can actually afford to take sick leave. This is potentially even more important as we move to coronavirus as ‘endemic’ rather than ‘pandemic’ and the great uncertainty as to what comes next.

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(Suggested citation: L Rodgers, ‘Going backwards: statutory sick pay after the pandemic’, UK Labour Law Blog, 12 April 2022, available at https://uklabourlawblog.com/)