Sick pay reform could boost UK economy by £4bn, study suggests

Increasing SSP payments and focusing on preventative measures could reduce the number of workdays lost to ill-health, report says

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The UK economy could benefit from a £3.9bn boost by increasing Statutory Sick Pay (SSP) payments, a paper has said.

The report, Statutory Sickness Support, commissioned by Unum UK and conducted by WPI Economics, has said by moving from a system focused on payments to one designed to deliver proactive and effective employee support, businesses could reduce the overall number of sick days taken.

Early intervention services, such as vocational rehabilitation, could reduce sickness absence by 17 per cent, it said, but even a 10 per cent increase in the speed of returning to work could see businesses collectively save £300m, with the taxpayer also saving £100m through smaller benefits payments.

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It added that raising the amount businesses needed to pay out through SSP would better incentivise firms to prioritise preventative wellbeing measures.

While SSP is currently £99.35 per week – around 28 per cent of the average earnings of someone eligible for the benefit – the report suggests increasing this to 63 per cent of average earnings.

The proposal also called for eligibility to be widened, noting that currently 70 per cent of women do not qualify at all for SSP, and for businesses to be provided with targeted guidance and support on how to create better sickness management policies.

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The report also suggested that by investing £500m into helping smaller businesses pay for SSP and improve their mental and physical health support for staff, the Treasury would still see a reduction in its overall costs when balanced against the outlay of the current system.

Angela Matthews, head of policy and research at Business Disability Forum, said SSP was “one of the main urgent issues causing widening workplace health inequalities [and] has had far too little political attention to date”.

“We cannot level up the country, address increasing intersectional health inequalities, or harness the government’s commitment to increase flexible work options unless we urgently remodel the SSP system,” she said.

The report estimated the current SSP system costs the Treasury £850m annually in lost taxation and increased benefit spending, and said ill-health that prevented employees from working cost the economy £130bn a year before the pandemic.

A separate survey of 1,045 senior HR professionals and decision-makers, conducted by the CIPD last year, found that nearly two-thirds (62 per cent) of employers saw the SSP rate as too low and believed it should be increased.

The majority (57 per cent) of SMEs surveyed, which would typically find it harder than larger employers to cover increased SSP costs, also supported the rate increase.