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Statutory sick pay reform ‘could boost UK economy by £3.9bn’

The UK economy could get a £3.9bn boost over the next five years if the government reforms the 40-year-old Statutory Sick Pay (SSP) system.

That’s according to a report from employee benefits specialist Unum UK based on research conducted by WPI Economics.

SSP was introduced in the early 1980s but has gone largely unreformed, failing to reflect changes in the way we all live and work, the report says. Workers on SSP currently receive £99.35 a week. Around two million workers – 70% of them women – do not qualify for SSP.

Research data estimates the current system directly costs the Exchequer £850 million annually in lost taxation and increased benefit spending. In the wider economy, ill health that prevented employees from working cost the economy £130 billion a year before the pandemic.

Statutory Sickness Support proposes a fundamental overhaul, moving from a system focused purely on payments, to one that is designed to deliver proactive and effective employee support. 

Statutory Sickness Support would address the current sick pay system by:

  • widening eligibility, so all workers are protected;
  • bringing the rules up to date, to accommodate flexible working;
  • simplifying calculation and administration for employers; and
  • strengthening the safety net to reduce ‘income shocks’ and alleviate poverty.

Unum claims its proposed reforms would boost the average ‘replacement rate’ (the proportion of salary covered by SSP) for workers on SSP from 28% of earnings under the current system to 63%, with the majority of the benefits going to workers earning less than £25,000 a year.

Alongside overhauling sick pay to better protect workers, Statutory Sickness Support can help employers with more guidance on how to prevent and manage employee sickness. Unum is calling on government to:

  • provide targeted guidance and support for employers;
  • introduce a new conditional sick pay rebate for small businesses who do the right thing; and
  • launch a £500 million fund to deliver a ‘shot in the arm’ for SME investment in health at work.

Based on conservative estimates, modelling conducted for Unum by WPI Economics estimates potential benefits of Statutory Sickness Support to the economy of up to £3.9 billion over the next five years, as well as direct savings to the Exchequer up to £1.3 billion.

Unum is calling on policymakers to introduce Statutory Sickness Support as soon as possible to improve the health and productivity of Britain’s workforce.