Labour announced ahead of the election that it planned to reform sick pay as part of its “Plan to Make Work Pay,” many aspects of which are being made law through the Employment Rights Bill.
Currently, workers are entitled to £116.75 a week for up to 28 weeks if they are too ill to work, which will rise to £118.75 a week from April 2025.
The Government has pledged to “strengthen” sick pay by removing the three-day waiting period before it begins and scrapping the minimum earning limit to ensure low-paid or part-time workers can claim it.
When the legislation was published, however, the Government did not specify what proportion of an employee’s wages employers would be required to pay. The Department for Work and Pensions (DWP) launched a consultation in November to establish what this percentage should be.
The Employment Rights Bill includes measures allowing workers to claim sick pay from their first day of absence, as well as removing the £123 lower earning limit.
The Government has claimed that this reform will mean that 1.3 million workers will be better off due to increased earnings during periods of illness.
Under current rules, this employee would not be entitled to statutory sick pay. However, following the planned reforms, they would be entitled to receive £97.68 a week from their employer for the duration of their sickness.
If a full-time employee earning £488.40 a week was off sick for two weeks, they would only be entitled to £166.25 a week from April 2025.
Why is the Government reforming sick pay?
Announcing the changes to sick pay, Work and Pensions Secretary Liz Kendall said sick workers had too often had to choose “between staying at home and losing a day’s pay or soldiering on at their own risk just to make ends meet”.
The Government has said that it reached the decision to ensure low-paid workers get 80 per cent of their wage during sickness following a six-week consultation, which received over 1,700 responses.
There have been concerns that low rates of sick pay can disincentivise people from working, as it is sometimes more viable for them to quit and seek other forms of support, such as benefits, if they are not entitled to sick pay.
Ministers also want to strengthen sick pay to help boost growth, with the DWP pointing out that the World Bank has stated the UK needs “improvements in productivity” if it wants to see economic growth.
“Today’s changes will boost productivity in the workforce to help drive growth and usher in a decade of national renewal,” the DWP release announcing the changes said.
PIP is a benefit which is gradually replacing DLA, and both aim at helping people with extra living costs if they have a long-term physical or mental health condition or disability and have difficulty doing everyday tasks or getting around. Only people aged under 16 can currently make new claims for DLA.
The latest welfare figures also show an increase in those claiming out-of-work benefits without any obligation to look for employment – with 3.1m not required to take steps to move into the job market.
However, the Government said the proportion of people in the “no work requirements” conditionality regime now stands at 42 per cent and continues to increase.
How is the Government trying to get more long-term sick into work?
Ministers have pledged to overhaul the sickness and disability benefit system in a bid to get more economically inactive people into the workforce while also reducing the cost to the Treasury.
The Government is understood to be considering a tiered payment model for PIP as part of wider disability benefit reforms.
Another option under consideration is replacing the PIP system with one-off cash payments for specific needs instead of regular monthly benefits.
Ministers are also expected to review the eligibility criteria for PIP as part of the upcoming reforms to reduce the pool of people eligible for the benefit.
Recent consultation documents suggest that the Government aims to extend the qualifying period for PIP to better understand the impact of long-term conditions and allow them to identify short-term illnesses from which someone can make a “full recovery”.
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