A look at new sickness pay reform and its impact on SMEs

A new government scheme aimed at tackling sickness absence is going to be rolled out nationwide in April this year. It will be called the Health and Work Service. The service is aimed at SMEs, which are less likely than larger companies to have on-site occupational health advisers or be able to afford to offer employees health services via private medical or income protection insurance schemes.  

This scheme will be funded through savings made from removing the ability of small businesses to reclaim their statutory sick pay costs (SSP), which took effect in April 2014.  

The new Health and Work Service follows a review into health at work carried out by Dame Carol Black in 2011. She identified the importance of specialist occupational health advice in reducing employee absence. This review is part of the government’s attempt to reduce the amount of employee sick days, which it estimates:

  • Costs employers around £9bn a year in sick pay and associated costs
  • Costs individuals £4bn a year through lost earnings and leads to around 300,000 people a year falling out of work and into the welfare system because of health related issues. 
The Health and Work service consists of two elements, advice and assessment.  

It will provide advice to employers, employees and GPs via its website and a phone helpline. The advice will be aimed at helping individuals to stay in or return to work.  

The assessment will be provided by occupational health professionals and is available where the employee has been off sick for four weeks or more. The referral for assessment will normally be made by the employee’s GP, but the employer can also refer the employee for an assessment.  

The role of the occupational health adviser will be to identify any obstacles preventing a return to work and recommend any measures that will help the employee return to work. These recommendations will be provided in a return to work plan that will be shared with the employee, employer and GP.

The assessment will initially consist of a telephone call to try and identify the issues preventing the employee from returning to work. The Department for Work and Pensions envisages that most employees will not require further assistance. Those that do will be referred for a more thorough assessment to consider how and when a return to work can be managed. This could be by telephone or face to face.

There will be a tax exemption of up to £500 per year per employee on any medical treatments that are recommended by the occupational health adviser and paid for by the employer.

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The intention behind the service is well placed. It will provide small businesses with access to occupational health professionals. The costs of instructing occupational health advisers can put small employers off seeking this advice, but increasingly employment tribunals expect employers of all sizes to have sought such advice before making decisions about sick employees. 

The success of this service will depend upon how thorough the assessment and subsequent return to work plan is. Small businesses will be looking to the service to provide clear guidance about whether the employee is fit to work, what adjustments should be made to help the employee return to work and for how long the employee’s absence is likely to last. Employers need clear findings so they can:

  • Judge what adjustments to the role could be made
  • Assess whether the employee is disabled for the purpose of the Equality Act 2010
  • Decide whether to keep the employee’s job open any longer or dismiss them on the grounds of incapability
The removal of financial support for SSP has been costly for small businesses. SSP is currently £87.55 per week for a maximum of 28 weeks absence. So a business with an employee who takes 28 weeks absence is left facing a SSP bill of £2,451.40.  

Whether the new service makes up for this loss will only become clear once it is rolled out nationwide in April 2015. My view is that the government’s money is better spent on a new service that will proactively help employers to rehabilitate ill employees back into the workplace, in contrast to subsidising statutory sick pay which amounts to a blanket approach and which does not provide any incentive for employees to return to work. 

Ben Stepney is an associate in the Employment Team at Thomson Snell & Passmore.

Image: Shutterstock

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