Sick pay reforms could damage small businesses

21 February 2014

Sick pay reforms could damage small businessesFrom 6 April this year, businesses are to lose the right to reclaim statutory sick pay (SSP) and the reform could trigger small business closures, accountancy firm Baker Tilly is warning.

Currently, employers pay a worker who has been signed off as sick £86.70 per week. Once the SSP exceeds 13% of the total National Insurance bill for the period, employers can recover it under current rules known as the Percentage Threshold Scheme (PTS). This was designed as a disaster relief scheme for small employers who could not afford to bear the cost when too many workers were off sick.

However, PTS is being abolished from 6 April this year. It means that employers will have to pay the SSP and pay for any replacement workers needed with no right of recovery.

David Heaton, Baker Tilly tax partner said: "From April, statutory sick pay will be £87.55 per week, so if one employee is absent for a long period, the bill will be a maximum of £2,450 for 28 weeks or more of absence. This is a huge burden for a small business to bear and I fear this will make some businesses uneconomic."

The PTS is being abolished to fund a new Health and Work Service, an occupational health service for small business to which any worker off sick for four weeks must be referred. The new service is due to be up and running by late 2014.

The Health and Work Service will apply to England, Wales and Scotland, offering non-compulsory medical assessments and treatment plans to those sick and off work for more than four weeks.

Staff who are off work for more than four weeks will still be entitled to SSP from their employers, but under the scheme employers or GPs will be able to refer employees for a work-focused occupational health assessment. This may include fitness for work advice, medical care, working from home or retraining.

The scheme, which is intended to save businesses up to £70m a year in reduced sickness pay and related costs, is not compulsory. Workers will be allowed to refuse assessment or treatment.

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