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04 April 2014

What does the Statutory Sick Pay Reform mean for your business?

From 6 April, the Government will abolish the Percentage Threshold Scheme (PTS) which enables employers to reclaim Statutory Sick Pay (SSP) from HM Revenue & Customs.

Previously, businesses have been able to claim this, provided the total Statutory Sick Pay paid within a month exceeds 13% of an employer’s Class 1 National Insurance contributions for that month.

This has been the case since 1995, however an independent report carried out in November 2012 highlighted that the cost of the Percentage Threshold Scheme was costing somewhere in the region of £50 million per year. The report recommended abolishing the scheme as the existing scheme currently rewards employers with high staff absence and therefore gives no incentive to reduce it.

Instead, a new Health and Work Service will be introduced which will offer voluntary medical assessments and treatment plans for employees and is intended to deliver substantial savings to employers by reducing days lost to sickness absence. However, this new service is not expected to be live until 2015, therefore employers will have to absorb the cost in the meantime.

So what does this mean for your business?

It is envisaged that smaller employers i.e. those with less than 10 employees who receive 70% of the benefit of the Percentage Threshold Scheme will benefit disproportionately from the new service.

However, that is balanced by the fact that abolishment of the scheme will have a significant detrimental impact on those smaller employers for whom the cost of funding Statutory Sick Pay for a full time single employee on long term sick leave will be very significant. It has been noted that as the rise in Statutory Sick Pay will put it at £87.55 per week from April, if an employee is absent for a long period, it will cost an employer around £2,540 for 28 weeks.

It therefore remains to be seen whether one will balance the other out but it does appear that these changes create a huge financial burden for small businesses and there is a fear that some may face significant cashflow issues in managing long term Statutory Sick Pay.

By working in close partnership with a trusted legal advisor, organisations can be advised on how best to deal with this reform. Contact Kathryn Fielder, Senior Associate in the Employment law team on 01753 279029 or email employmentlaw@bpcollins.co.uk

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Phone: +44 (0) 1753 889995

Email: enquiries@bpcollins.co.uk

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