Statutory Sick Pay: the impact of changes on reward strategy

What are the implications of the changes to SSP for employers and what challenges and opportunities may come out of it?

The government's Make Work Pay initiative, designed to help more people stay in work, support workers’ productivity and improve living standards, is at the heart of the government’s mission to grow the economy.

One significant element of the initiative is the recent changes to Statutory Sick Pay (SSP) in the UK, which come into effect from April 6.

This shift requires HR/reward professionals to consider the impacts of such a change and how it will likely impact their business.

And although a number of organisations may have enhanced sick pay policies, it is always an opportunity to assess the implications of these changes and what challenges and opportunities may come out of it.

What are the changes?

The key changes to SSP are:

Removal of waiting days: SSP will now be payable from the first day of sickness, eliminating the previous three-day waiting period. This will reduce the financial uncertainty for employees during periods of illness. By removing the waiting days and expanding eligibility, the government wants to ensure that more people can access financial support when they need it most.
Eligibility expansion: SSP will be available to all employees, including those earning below the lower earnings limit. This should encourage employees to take the necessary time off to recover from illness without the fear of losing income. This is expected to lead to better health outcomes and reduce long-term sickness absences.
Increased SSP rate: The SSP rate will increase from £116.75 to £118.75 per week to support greater inclusivity, especially for those employees on low income who were previously excluded.

On the face of it, these changes may put more financial pressure on the employer by increasing employee rights and increasing labour costs potentially impacting business growth, particularly for smaller businesses.

However, what we hope to see is that the changes will bring about improved worker satisfaction and productivity which could offset these costs, of benefit to the employer and the wider economy.

How should companies adapt?

With the impending changes coming quickly, employers have some work to do to adapt to these changes in time for April 2025.

Taking the opportunity to reflect on your current practices is key, even if this change does not necessarily impact directly, taking stock of how you manage your sickness absence practices are worthwhile.

If you expect an increase in sickness absence because of the changes, do you have the right interventions to support employees return to work?

Updating payroll systems to ensure the new SSP rates come into effect from the first day of sickness is.

Understanding transition arrangements will also be important along with updates to any other HR policies.

It will also be prudent to look at your budgeting and forecasting for the next 12 months to see how these increased costs will affect the bottom line.

This needs to cover the increased SSP payments but also consider behavioural changes as a result of the removal of waiting days on your employee population.

This may also mean considering any operational impact of these changes.

Employees should also be providing training to HR and payroll staff on the new SSP rules, engaging line managers by sharing information about the policy and procedure changes and communicating these to employees in your organisation.

What to consider for reward strategy

The impending changes to SSP need to be implemented by all companies, regardless of their size and structure.

Organisations will also now need to consider how this impacts their wider reward strategy, including:

1. Financial impact

Outside of understanding the costs to cover increased SSP payments, it will be important to understand the trend pre and post the change to understand the impact this has looking into a variety of factors such as:

Incidences of absence (i.e. will there be more incidences of absence?)
Duration of sickness absence?
Days absence is taken?
What are the reasons for absence and what are the underlying causes?
Establish productivity losses because of this change (i.e. what is the true cost of absence)

The impact of the changes depends on your current approach to sickness absence management and reviewing your current policies might be necessary.

More importantly, prevention is better than cure so are there steps an organisation can take to mitigate the impact of sickness absence but more importantly have a happier, healthier and therefore more productive workforce?

2. Understanding your employees

Employers need to consider whether they are equipped to understand the root cause and contributory risk factors for employees that remain in work and those that are taking sickness absence.

Having strategies in place that assess not only the presenting symptoms but the underlying causation as well, can help employers understand what they need to address to reduce the occupational factors.

At the same time employees can benefit from tailored care to ensure they received the most appropriate intervention.

3. Employee wellbeing

By understanding your employee population, do you have integrated health and wellbeing initiatives to support those currently in work/reduce sickness absence and promote a healthier workforce?

Do you have the right interventions to support those returning to work to mitigate further instances of sickness absence?

Are you able to establish the outcomes of these initiatives outside of engagement, for example, perceived value?

Sometimes low-cost options are the items most valued by employees such as recognition.

4. Communication

Clearly communicating the changes and their implications to employees to ensure transparency and understanding alongside offering you an opportunity to promote offerings you have to support your employees.

There is no one size fits all approach to employee wellbeing and every organisation is different when it comes to employee populations, vision, values and strategy.

From a reward perspective, understanding what you have on offer, the perceived value from employees and focusing on items that give the best return is key.

It is important to continually check that the initiatives which may have been valuable in the past are still relevant.

A changing workforce means that the reward strategy must be continuously reviewed to ensured that it is fit for purpose at the time.

It's also important to remember that works for your older employees may not be as useful to your younger team members, particularly when thinking about health and wellbeing.

When it comes to sickness policies, it's important to remember that prevention is far better than cure.

Having the right tools in place to identify potential sickness causation factors early on and offering the right support to employees can make a real difference and, in some cases, prevent the employee from needing time off in the first place.

Beyond the new SSP requirements, employers have a duty of care to look after their employees and provide a supportive environment for everyone.