Everyone deserves a sick pay system that works

Debbie Kennedy – Protection Director

'Two million employees in the UK do not qualify for statutory sick pay'

The Covid-19 pandemic has made clear the inadequacies of Statutory Sick Pay and it's time to find an alternative solution, writes Debbie Kennedy, protection director at LV=.

When it comes to the subject of Statutory Sick Pay (SSP), most people including Health Secretary Matt Hancock, would agree that it is too low to cover essential outgoings. For months, Mr Hancock has been trying to convince the Treasury to increase SSP so that more people can afford to self-isolate after experiencing Coronavirus symptoms.

This has resulted in a pitiful rise of 50p to £96.35 a week, which is not enough to live on. Families depending on these income streams may struggle to make up the shortfall, proving that SSP is not fit for purpose if many people are forced to continue working.

At the onset of the Coronavirus outbreak, the Treasury removed the four day waiting period for people to qualify for statutory sick pay, yet there is still need for reform. Those who are self-employed or earning less than £120 a week are not eligible for sick pay and are more vulnerable to income shocks. The combined efforts of government policy, employers and insurance providers should be able to offer support to suit different ways of working.

"The recommended sum of money for an emergency fund is £3,000, or three months’ worth of outgoings, which is less than half of what the UK population had access to even before the pandemic struck."
Debbie KennedyDirector of Protection
It is clear that the British public do not have the same level of government help compared to other countries if they are too ill to work. For example, the average sick pay in Germany is £436 a week, enabling those unable to work from home to focus on getting better rather than being forced to make ends meet on a reduced wage. This is more severe for self-employed workers - over 4 million people - who get no support from the state.

Exposed frailties

The Coronavirus crisis has exposed what was there all along - the necessity to keep households afloat, with little support from the state, drives many to continue working when unwell. The responsibility for providing an income when people are unable to work falls on the individual, which is what makes insurance or private provision so valuable.

For those with variable income streams, government support was only possible by introducing emergency Coronavirus measures at the last minute. What will happen once the pandemic is over?  The Resolution Foundation[1] recently proposed that the Jobs Retention Scheme and the Self Employed Income Support Scheme should take a permanent form of earnings insurance. The Resolution Foundation highlighted the success of a welfare model that provides payments directly related to workers' previous earning.

This was fundamental to the success of the Government's rapid economic response to the pandemic, with key similarities to income protection products. Is this the time for both the state and private insurance to work together to provide a model for wage protection which incentivises and encourages take up by all workers. 

As the world of work evolves, it is only fair that policy surrounding statutory sick pay should move along with it. LV= research has revealed that a quarter of self-employed workers have less than £2,000 of savings in case they were unable to work due to illness or an accident.   

The recommended sum of money for an emergency fund is £3,000, or three months' worth of outgoings, which is less than half of what the UK population had access to even before the pandemic struck.

Those who are self-employed or have lower-paid jobs would benefit most from private provision because of the sporadic nature of their income. According to The Resolution Foundation, two million employees in the UK do not qualify for statutory sick pay, while 4.5 million self-employed people are automatically excluded.

Older people have also experienced challenges staying employed. A TUC report[2] showed that over half a million workers aged 60-65 had to leave the workplace early because of medical reasons. One in three low paid workers left their jobs before state pension age due to ill health.

Lifting the burden

I believe that protection insurance does have an important part to play in maintaining household income, and which extends beyond wage replacement. Extra benefits from providers can support families in different ways, from offering remote health services and counselling to helping people retrain for a faster return to work.

In some cases, an insurer would be able to ease the burden in ways that an employer would not, reducing the risk of leaving bills and other expenses unpaid.

Options such as Budget Income Protection and flexible protection plans mean that more households can take full advantage of the support available from insurers. The LV= Wealth and Wellbeing Monitor revealed that half of parents in the UK supported their adult children during lockdown by paying rent and living expenses, considerably stretching their finances in ways that SSP could not possibly cover

Younger people are also more interested in taking out income protection due to the effects of the pandemic. Around 44% of 25-44 year olds surveyed said that their finances were worse compared to three months ago, with 48% now considering income protection. Hopefully as awareness grows, people can see that protection is well within reach to make their money work better for them.

The Government should take the opportunity to reform statutory sick pay and any surrounding legislation so that those affected don't fall between the cracks of a flawed system. Means testing for Universal Credit should also be revisited to stop protection policyholders from being unfairly penalised.

Ultimately, the insurance industry has stepped up in areas that statutory sick pay has fallen short, contributing £100m to the Covid-19 Support Fund last year. From the start of the Coronavirus crisis, protection providers have collectively helped many families across the country, revealing the true impact that insurance can have on the public's financial health and wellbeing. The government needs to find an alternative to SSP that can function as an effective safety net for everyone.



[1] The Resolution Foundation

[2] TUC Report