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Change in Sick Pay affects Businesses

2014
24
FEB

The following article is taken from the Telegraph dated 18 February 2014.  Not all businesses have been able to recover SSP as it is dependent on the level of NICs paid but now all businesses will have to pay SSP as well as cover the cost of a temporary replacement worker.

 

A change in sick pay regulations is posing a threat to the future of some of Britain’s smallest businesses, according to tax specialists.

They say the companies will face new financial pressures from the loss of the right to reclaim statutory sick pay through a deduction in their monthly National Insurance contributions.

David Heaton, employment taxes partner at Baker Tilly, says: “For some of the smallest this will be catastrophic and may lead to closure.”

The Government will save a relatively modest £50m a year from the change, but Mr Heaton says it would have an enormous impact on micro businesses with only one or two employees.

He claims both HMRC and the Department for Work and Pensions (DWP) have done little to publicise a change that was announced a year ago and is due to come into force on April 6. Mr Heaton says he was unable to find any reference in a trawl through the DWP website, and it only gets a brief mention on the HMRC website.

DWP has scrapped the relief because it feels the rebate does not provide an incentive for employers to get sick employees back to work.

The money “saved” is earmarked to fund a new Health and Work Service being set up for small firms. Any worker off sick for more than four weeks must be referred to the new body.

At present small firms pay an absent employee £86.70 a week sick pay and foot the bill for a replacement worker. They can start to recover the statutory sick pay once the outlay exceeds 13pc of their total NI bill. The provision is described as “disaster relief” for small firms faced with a big outlay when too many workers are off sick.

But from April they will have to foot the bill for both sick pay and the cost of staff replacement without any right of recovery.

Next year statutory sick pay will be running at £87.55 a week and without relief will build up into a huge amount and make some businesses uneconomic, said Mr Heaton.

He cites the case of a small nursery where one of two employees is on long-term sick leave for cancer treatment. “They can’t afford the statutory sick pay and this could result in the business going under,” he added.

 

 

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