Proposed reforms to Statutory Sick Pay (SSP) under the Employment Rights Bill represent a significant expansion of employee entitlement and a corresponding increase in employer responsibility. The changes are designed to improve financial security for lower-paid employees, but they will also have cost, compliance, and workforce planning implications for employers.
What’s Changing?
Statutory Sick Pay currently provides a minimum level of income for employees who are unable to work due to illness. Under the existing framework, entitlement is limited to employees earning at or above the Lower Earnings Limit (currently £125 per week), and payment is only made from the fourth consecutive day of sickness absence.
The Employment Rights Bill proposes substantial reforms to this regime. The Lower Earnings Limit would be removed, extending SSP entitlement to all employees regardless of earnings. To ensure a proportionate level of income replacement, SSP would be paid at the lower of 80% of an employee’s average weekly earnings or the statutory flat rate (£118.75 per week).
The Bill also removes the current waiting period, meaning SSP would become payable from the first day of sickness absence. Responsibility for enforcement of SSP rights, including disputes, would fall within the remit of the newly established Fair Work Agency, increasing the likelihood of scrutiny and enforcement action.
Together, these reforms significantly broaden SSP coverage while reshaping how payments are calculated and when they become payable.
What Does This Mean For Employers?
- Universal SSP eligibility
All employees will qualify for SSP, including those previously excluded due to earnings below the Lower Earnings Limit.
- More complex SSP calculations
Employers will need to calculate SSP at 80% of average weekly earnings for some employees, subject to the statutory cap, requiring payroll, systems and process updates.
- Day-one SSP entitlement
SSP will be payable from the first day of sickness absence, increasing costs associated with short-term and intermittent absence.
- Increased overall cost exposure
While the percentage-based approach limits exposure for higher earners, employers should anticipate an overall increase in SSP-related costs.
- Stronger compliance and enforcement
Oversight by the Fair Work Agency elevates the importance of robust absence management, accurate records, and consistent decision-making.
Where Do Settlement Agreements Come Into Play?
SSP is a statutory entitlement and cannot be waived. However, settlement agreements may still play a role in managing risk where sickness absence leads to wider employment issues.
In practice, settlement agreements are often used:
- Where long-term sickness absence gives rise to capability concerns following a fair and lawful process
- To resolve disputes about sickness absence management, reasonable adjustments, or discrimination risk
- To bring certainty and finality where employment is ending, while ensuring statutory entitlements (including SSP) have been met.
As SSP entitlement expands and enforcement increases, employers may see a corresponding rise in disputes connected to absence, capability and workplace adjustments. In those situations, settlement agreements can form part of a pragmatic exit strategy – once the appropriate procedures have been followed.
Key Takeaway
The proposed SSP reforms will require employers to review sickness absence policies, payroll processes and workforce planning well in advance of implementation. With costs rising and enforcement tightening, early legal advice, and a structured approach to dispute resolution – including the appropriate use of settlement agreements – will be increasingly important in managing risk and maintaining compliance.
How Can We Help?
At Harding Evans, our specialist employment law team supports employers in managing sickness absence and Statutory Sick Pay compliance. We help businesses prepare for the proposed SSP reforms under the Employment Rights Bill and manage absence-related risk effectively. If you need tailored advice on navigating these changes, get in touch on 01633 244233 or email wilded@hevans.com.
