Employment Rights Bill

Committee (3rd Day)

Clause 11: Statutory sick pay in Great Britain: lower earnings limit etc

Amendment 71A

71A: Clause 11, page 37, leave out lines 21 to 24 and insert— “(1) Statutory sick pay is payable by an employer to an employee—(a) at a rate of 60% of the employee’s normal weekly earnings for the first three qualifying days of any period of incapacity for work,(b) at a rate of 80% of the employee’s normal weekly earnings for subsequent qualifying days,subject to a maximum of £116.75 per week.(2) Subsection (1) applies regardless of whether the employee earns above or below any lower earnings limits that were previously set.”Member’s explanatory statement This amendment adjusts the rates of Statutory Sick Pay (SSP), providing 60% of normal weekly earnings for the first three qualifying days and 80% for subsequent qualifying days.

My Lords, I shall speak also to Amendments 71B and 75 standing in my name.

According to the latest figures from the Office for National Statistics this morning, the number of payrolled employees fell by 33,000 in April, or 106,000 on the year, and the number of job vacancies also fell. Wage growth has slowed. This evidence suggests that the OBR was right and the provisions in the Bill are already creating a net negative impact. The Chartered Institute of Personnel and Development’s latest survey was widely cited at the weekend. It confirms that employers’ confidence is at the lowest level since the pandemic and that a quarter of employers are planning to make redundancies in the next quarter. The CIPD’s economist, Mr James Cockett, was quoted as saying:

“The Employment Rights Bill is landing in a fundamentally different landscape to the one expected when it formed part of the Labour manifesto in summer of last year”.

This picture was confirmed in KPMG’s and the Recruitment and Employment Confederation’s reports. Recruitment activity across the UK continued to weaken at the start of the second quarter. The chief executive of the REC, Neil Carberry, has said that

“it is time for real changes to address employers’ fears and boost hiring. A sensible timetable and practical changes that reduce the red tape for firms in complying with the Bill will go a long way to calming nerves about taking a chance on someone”.

Last week the noble Lord, Lord Fox, called for the Bill to go on vacation because we need to get it right. This raft of new statistics proves his prescience, and perhaps the vacation ought to be permanent. Instead, we are now being asked to consider further obligations on employers through changes to statutory sick pay. A number of businesses across sectors have made it very clear that, while they support the principle of statutory sick pay, they are concerned about the rate and structure being proposed. Many have called for the rate of statutory sick pay to be set at 60% rather than 80%, as a more sustainable and proportional figure. The Government claim to have consulted widely with businesses, trade unions and various stakeholder groups to try to strike a fair balance, but, based on the data and the concerns raised, we believe that the right answer, particularly for the initial days of absence, is 60%.

These are not abstract figures: they point to real-world economic decisions that are being made in response to uncertainty and increased cost pressures. The Government have rightly emphasised their goal of encouraging people back into the workforce, particularly after the long-term disruption caused by the pandemic. We obviously support this aim but, to do so effectively, we must create the right environment: one that supports employees when they are genuinely unwell while also giving employers the confidence and flexibility to hire.

Amendment 71A, which I am supporting today, seeks to do exactly that. This amendment proposes that statutory sick pay should be paid at 60% for the first three qualifying days, then raised to 80% thereafter. This would reflect the reality that short-term absence imposes different challenges on businesses from long-term illness. It would also ensure that those who are seriously unwell or suffering from longer-term conditions still receive the full financial support that they need and deserve.

This approach reflects the principle that incentives should be tailored and not uniform: not one-size-fits-all. We need a more flexible, graduated approach to sick pay that reflects the real operational pressures that businesses face while maintaining adequate protections for workers. We believe that this amendment strikes that balance.

It is also worth noting that, during early discussions around the Bill, the Government themselves indicated that a range between 60% and 80% was under consideration. This amendment is therefore not a radical departure from the Government’s own thinking, but rather a reasonable refinement.

I also draw the Committee’s attention to the concerns raised by UK Hospitality, which has said that more than 95% of its members have expressed concerns about the Government’s plans to remove the existing requirements to serve waiting days before receiving SSP—statutory sick pay. Let us take, for example, the pub sector, which directly employs over 600,000 people across full-time and part-time roles. The latest statutory sick pay proposals are projected to add upwards of £10 million in additional costs to this sector alone, a sector that we all understand is struggling.

Currently, some sickness days go unpaid due to employees falling below the lower earnings limit or not qualifying under the existing waiting period rules. However, stricter reporting requirements and the shift to guaranteed hours are likely to increase these costs even further. I remind the Committee that the Government’s own impact assessment states:

“Overall, we assume the direct increase in costs to businesses is a direct transfer to employees in the form of sick pay, and therefore is neutral on a net present value basis but will improve equality. The wider impacts are deemed uncertain given the difficulty in predicting behavioural impacts around presenteeism, absence and transmission of disease”.

We should remember that this impact assessment was conducted in—to use the phrase I quoted earlier—“a fundamentally different landscape”.

We appreciate that the Government may not see Amendment 71B, with a flat 60% rate, as workable. That is precisely why we are offering Amendment 71A as a constructive alternative—a balanced, evidence-led compromise. It recognises that long-term sickness requires stronger protection while still addressing employers’ concerns about short-term absences. It provides incentives for people to return to work, encourages the genuine use of sick leave, and gives employers confidence to invest in their workforce without fear of unpredictable costs.

I turn to Amendment 75. As I have mentioned, the Government’s own impact assessment has stated that small businesses will face a disproportionate cost as a result of measures in this Bill. The £5 billion figure cited in that assessment is, in our view, likely to be an understatement. It relates almost entirely to increased administrative burdens while failing to calculate the significant knock-on effects on business costs and hiring behaviour, in particular the impact of making it more expensive to employ people.