Sick Pay Reforms Could Boost Economy

A sticky note with statutory sick pay written on it and underlined
Author: Samuel Beckingham
Updated: Jul 26, 2023
3 minutes read

Research conducted by WPI Economics has found that the way the current sick pay system works is not fit for purpose. By increasing the amount that everyone is entitled to, it could benefit the economy by £4.1 billion. The idea behind the reforms is that absence levels would be reduced and productivity would increase. With proper support that’s there when needed, long-term illnesses wouldn’t harbour as much inactivity.

The research came after the high levels of people off work due to long term illness reached an all-time high. Even though the reforms to sick pay would come at a cost to businesses, the benefits far outweigh the initial price they would pay.

Statutory sick pay is only £109.40 a week for up to 28 weeks. Such a low wage has forced 1 in 3 workers into poverty. The research also showed that employees that are entitled to sick leave were 28% less likely to be injured or ill than employees without it, which can reduce the cost and pressure on the NHS.

The ONS observed that 2.6 million workers were still economically inactive due to long-term sickness. Any boost to sick pay would support hard workers and boost the UK economy for post-pandemic recovery. A blanket approach for sick pay would be more beneficial in this regard, especially for low paid workers who often don’t qualify for sick pay. They can be injured while working when they shouldn’t be.

The Department for Work and Pensions responded to the research by highlighting the benefits of being in work. They specified that £3.5 billion was being invested to help millions of people suffering from a long-term illness to start and stay in work. While sick pay reforms haven’t happened, the DWP specifies that 300,000 people have been helped already.

For those that are still inactive and unable to return to work, the DWP said that employers can choose to pay more in sickness leave or employees could make use of Universal Credit instead. Despite the report highlighting the extent of poverty in these employees unable to return to work, the government seems to be under the impression that everything will sort itself out.

The main issue with this narrative is that growth in the economy is dependent on its employees. If the people aren’t looked after, they can’t do the work that’s required. More and more people have been falling out of work for various health related issues and the system isn’t designed to support them well enough to get them back into work again more quickly. In 2018, for example, the report specifies that 140 million working days were lost to illness. This equates to a loss of £130 billion a year.

The system of statutory sick pay is now 40 years old, and it hasn’t kept up with the way work has changed in that time. Reforms are needed to protect all employees, boost businesses and help stimulate the economy. As the only G7 country that hasn’t returned to pre-pandemic levels of productivity, this should be a priority for the UK.