The abolition of the rebate on statutory sick pay has hit some small businesses very hard. Until April last year the Percentage Threshold Scheme allowed employers to reclaim payments as soon as the outlay reached 13% of NI costs. Since April 2014 this benefit has been abolished. In this article, Stephen Levinson analyses the effects the reform has had on SMEs.

Employers now have to foot bill for both the sick pay and any costs of providing replacement workers. Large employers will not have noticed the change but small businesses certainly have. The first reason given for the removal was suspiciously high-minded, it was said that the existence of the scheme provided a perverse incentive for employers not to manage absence adequately. Secondly it was said that the scheme was cumbersome and administratively complex to manage. In relation to the last point one is tempted to ask why the complexity, presumably created by government regulations, could not be simplified by better regulations. As for the first reason it is perhaps not too cynical to think that the saving of over £50M was tempting for a strapped-for-cash administration.

The further explanation was that the saved money was to be used to set up a new Health and Work Advisory Service which to provide employers with guidance about the management of absence in the workplace. The way this scheme is intended to work is that workers who have been off for more than four weeks may be referred for a work assessment by an occupational health specialist. Internet and phone advice services will also be available to employers. When the abolition was announced it was said that to minimise impact Government would not remove PTS in isolation. The weasel words were ‘any timescale …would be linked to the introduction of the health and work service’. Any innocent who might have thought this meant the two things would happen at the same time needs a lesson in reading small print. Although the rebate was ended last April still no date has been announced for the new Service except sometime this year. No doubt that is sufficiently ‘linked’ to the abolition for the civil service. The idea is that the Assessment and Advisory Service will eventually save costs as standards of sickness management will improves so much because of the availability of this service. We will have to see about that in due course but in the meantime cash flow suffers.

There is something very odd about the Government having stated its commitment to small businesses by relieving them from red-tape and new regulation then adding to their burdens by removing cash benefits many found useful. Some gloomy calculations are that the new regime may drive businesses to the wall. Figures of the actual costs are not easy to calculate but statutory sick pay is £87.55 a week, so if a worker is off for a long period, the bill will be up to £2,450 for 28 weeks or more of absence. This is a considerable cost for a small business and of course there is often the added price of providing a replacement.

Whether the rationale given by Government will work in macro terms is one thing but in any individual case everything will turn on the quality of service provided by the new service which is untried. As things have panned out the removal of the rebate has not been coordinated with the availability of the service so delivery of the new regime has been somewhat clumsy. Surely the removal of the benefit could have been put on hold until the new service was up and running.

In the meantime what is an employer to do? What should be avoided is to assume everyone is a hypochondriac or swinging the lead. If everyone knows you think that it will create avoidance tactics and management difficulties will increase. Also avoid schemes that reward constant attendance. These encourage the genuinely sick to work when they should not and can land employers in difficulties on health and safety grounds.

One of the key aspects is to be rigorous about speaking to those returning from short absences every time it happens. It does not have to be aggressive or offensive but making it plain that any absence will have to be explained on a face-to face basis. Filling in forms is well enough and there is no harm in it being a requirement but having to account personally your your manager will be more effective.

The standard distinction that has to be kept in mind is the difference between short-term absences and longer periods and they require different techniques. For anything that is between a couple of days and two weeks a return-to work interview is advisable to explore the reason and also to see if the cause is anything to do with the workplace which can be removed or improved. Longer periods need careful handling and it is best to keep in touch with calls and even visits if necessary. Being too concerned not to be seen to be pressurizing an individual to return too early and keeping your distance is generally a mistake. Free guidance is available from Acas publications and all businesses should make sure they have and follow clear policy guidelines within the business (and these do not have to be great screeds of print). Ensuring these are available and known to all is essential.

Present policies have increased the cost of absence and the promised changes will take time to have any effect so adhering to the well-established policy guidelines for managing absence and being as hands-on as possible is even more important now than it has ever been.

This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.