Written evidence from the Work Foundation SSP0028

Introduction

1. The Work Foundation is a think tank focused on improving working lives across the UK through applied research and innovative ideas. For over a century, we have worked to break down the barriers individuals and communities face in accessing, and remaining in, good work.
2. We believe everyone should have access to secure, rewarding, and high-quality work. By engaging directly with workers, employers, policymakers, and leading academics, we deliver rigorous applied research to tackle structural inequalities in the labour market and improve working lives across the UK. We are part of Lancaster University’s Management School, and work with a range of partners and organisations across our research programmes.
3. We have chosen to respond to selected questions. Our evidence submission focuses on questions one, three, five, seven, and nine.

Executive Summary

4. Statutory Sick Pay (SSP) is a vital financial safeguard that supports employees unable to work due to illness and incapacity. However, there are important flaws in the SSP system that are felt particularly by those in insecure work. As our labour market experiences record levels of economic inactivity, high prevalence of job insecurity, and an ageing workforce, reforming SSP would make working life better and more viable for those in insecure work and potentially at risk of failing out of the labour market altogether.
    
5. Work Foundation research found one in five workers in the UK are in severely insecure work (6.2 million). These jobs are characterised by low pay, unpredictable hours, and lack of autonomy. Evidence suggests that those in insecure work are more likely to experience stress and anxiety. Additionally, being in insecure work limits people’s routes out of insecurity and impacts their ability to obtain future secure, well-paid work.
6. Our estimates suggest that approximately 1.1 million workers in severely insecure work are ineligible for SSP, as they do not meet the earnings threshold. Some insecure workers would have access to SSP, but at its current level, it is not sufficient to provide a decent standard of living.
7. We find that those in severely insecure jobs are particularly impacted by low levels of SSP. For severely insecure workers, SSP offers an income replacement rate of just 26%. Our recent research indicates that close to half of insecure workers surveyed (49%) said they would struggle to personally pay an unexpected bill of £300 within seven days. While employers can opt in to pay more than the statutory minimum, this is least likely for those in the lowest paid roles.

8. Although the Government consulted on proposals to reform SSP in 2019, its response in 2021 highlighted that no changes would be made. Higher rates of SSP that are accessible to a wider range of workers, and a focus on preventative measures could help employers reduce sickness absence, support a quicker return to work, and a reduced flow into health-related inactivity.[1] This would be particularly key for local economies that are struggling with high levels of people who are out of work or who are at risk of failing out of work due to ill-health.
9. We recommend that the Government increase access to, and the level of, Statutory Sick Pay, making it available to all workers by removing the lower earnings limit. The Department of Work and Pensions should:
1. Reduce the waiting time for Statutory Sick Pay from four days to start on day one.
2. Raise the rate of Statutory Sick Pay to 60% of usual wages, or the equivalent of the National Minimum Wage or National Living Wage pro-rated by the usual number of hours worked, whichever is highest.
3. For self-employed workers without staff and gig-workers, establish insurance for income protection, which workers would pay into, and would be able to access in times of illness or short-term unemployment.

10. The type of job one holds has significant implications for their physical, mental, and financial health. For those in insecure work, who are more likely to suffer from low pay, less agency at work, and health conditions, setting an adequate level for SSP is crucial. If it is set too low, it risks increasing precarity as well as the chances of these individuals working when unwell or encouraging them to leave the labour market altogether.

11. The Work Foundation’s UK Insecure Work Index showed that there are over six million people in severely insecure jobs.[2] Recent Work Foundation research surveyed over 3,000 insecure workers across the UK. The research found that nearly half of workers surveyed (49%) said they cannot personally pay an unexpected bill of £300 within seven days.
12. Current levels of SSP are too low to provide a financial buffer for those in insecure work. The current SSP rate of £109.40 per week provides just 26% of severely insecure workers’ median weekly earnings. This is particularly important as Work Foundation research has highlighted that one in four insecure workers (28%) indicated that they are struggling financially and say they are finding it ‘quite’ or ‘very difficult’ to get by. Although employers can choose to pay more than this statutory minimum, this is least likely for those in the lowest paid roles.

13. Women are 1.8 times more likely to be in severely insecure work than men. This means women are more likely than men to be missing out on essential rights and protections at work, including sick pay. This can have negative long-term impacts on their health and wellbeing.[3]
14. Additionally, women in severely insecure jobs may be disproportionately impacted by the current allowance of SSP and level of pay as they lack the financial support to protect them. Currently, pregnant people are ineligible for SSP, and this is also the case if their baby is due in four weeks or less, if their illness is related to their pregnancy, or if they have had a baby in the last three months.[4]
15. People with ethnic minority backgrounds can be disproportionately impacted too. The chances that women will experience severely insecure work increases for Black and minority ethnic women and disabled women. For example, Black women (30.5%) and women from Pakistani (34.4%) and Bangladeshi (34.9%) backgrounds in particular face additional risk of being in severely insecure work, when compared to men from the same backgrounds.[5]
16. Disabled people are more likely than non-disabled people to be in insecure work. Due to inadequate sick pay, disabled workers can be forced to return to work before they are ready to do so, which could potentially worsen their disability or long-term health condition.
17. Work Foundation research emphasises that some disabled people had opted into insecure work because they required the flexibility to work from home, or to manage their illness without feeling like a burden. While some were making it work, others were struggling, but all faced increased precarity due to their employment situation. If disabled workers in an insecure job experience a change in their health, too few are currently entitled to Statutory Sick Pay that will buffer the impact on their finances and livelihoods.[6]
18. With high levels of job insecurity, it is crucial to support people in returning to and staying in work. The current SSP conditions risk trapping people in poor-quality jobs that can worsen their health.
19. In order to provide critical support to those in more insecure forms of work and make it more viable for those with fluctuating health conditions to remain in the labour market, we recommend the Government raise the rate of Statutory Sick Pay to 60% of usual wages, or the equivalent of the National Minimum Wage or National Living Wage pro-rated by the usual number of hours worked, whichever is highest.

Q3: Statutory Sick Pay is currently paid from the fourth qualifying day of sickness absence. Should this three-day wait period be changed or removed? AND

Q7: Should Statutory Sick Pay be extended to include those earning below the lower earnings limit? If so, what would be a fair balance between support for employees and avoiding the risk of creating a disincentive to return to work?

20. Understanding who is more likely to be in severely insecure work is key to address the challenges they face in accessing SSP. Currently, too many insecure workers are excluded from accessing SSP due to not meeting the earnings threshold.[7] During our qualitative research, some insecure workers also [8][9]

21. This inequality highlights the need for reform. TUC research illustrates this inequality further, revealing that only 35% of workers earning less than £15,000 a year receive full pay while sick, compared to 87% among those who earn £50,000 a year.[10]
22. The need of SSP can even be more acute for insecure and zero-hour workers. Evidence from previous research shows that income insecurity and low job satisfaction are identified as ways in which zero hours contracts harm wellbeing.[11] For instance, research found that the mental health of zero hours workers is, on average, 12.2% worse than other workers.[12]

23. The current four-day waiting period for SSP means that many miss out on sick pay, and even those who are off for longer must wait unnecessarily for financial support, which is especially difficult for those in precarious financial circumstances.[13] Workers on low pay cannot afford to take unpaid sickness absence and so are likely to continue to work in spite of their ill health or injury.
24. This presenteeism is not just a false economy for businesses, it is also a risk to public health. The additional transmission of contagious illness that arises from people working while they are ill hits employers, the public, and the NHS.[14]
25. In response to these findings, we recommend the Department of Work and Pensions strengthen and increase SSP and make it available to all workers by abolishing the lower earnings limit and reducing the waiting time for SSP from four days to start on day one. Such reform would act as a safety net that protects all workers, regardless of income, during periods of sickness, and would ensure they have immediate access to sufficient additional financial support throughout, reducing the risk of them leaving work.

Q9: Should Statutory Sick Pay be available to people who are self-employed? How might this work?

26. Currently, 1.7 million self-employed workers are in severely insecure work, and 1.6 million of these are ‘solo’ self-employed[15]. Self-employed workers do not have the same protections and rights as full-time permanent employees and are excluded from the SSP system due to their employment status.
27. The ‘solo’ self-employed, who work as contractors or freelancers without employees, do not have access to SSP.[16] This means that these workers have to choose between either taking time off and facing financial difficulties, or continuing to work in spite of their ill health or injury. Both these choices bring with them challenging implications for workers’ financial and mental wellbeing.
28. In order to make SSP available to self-employed workers, we recommend the Department of Work and Pensions establish insurance for income protection, which workers would pay into, and would be able to access in times of illness or short-term unemployment.

References