Changes to sick pay regulations that are intended to cut down on bureaucratic red tape will put some West Midlands’ businesses under a huge financial burden, one of the region’s leading employment lawyers has warned.
Employment expert Sally Morris has voiced her concerns on the new rules warning that despite them giving businesses greater freedom over sick pay and how they record staff absence, they will face hefty National Insurance contributions – putting financial pressure on smaller firms.
Ms Morris, partner and head of employment at law firm mfg Solicitors, is urging business owners to seek advice on the little-publicised sick pay shake-up that is being enforced by HM Revenue and Customs and the Department for Work and Pensions.
“The new sick pay rules were introduced on 6 April and abolished the need for employers to keep records of statutory sick pay for their staff, while handing them the freedom to use a system that suits them.” said Ms Morris.
“It is a welcome move but the new rules also brought down the curtain on an employer’s right to recover statutory sick pay from HMRC through their monthly National Insurance contributions. They can only be reimbursed for absences up to 5April 2014 as long as the claim is made by the end of the 2015/16 tax year.
“The money the Government will save is being used to prop up a new Health and Work Service which will create a referral service for any employee off sick for more than four weeks.
“But that won’t be launched until 2015. So for the current tax year, employers will have to cover the £86.70 weekly sick pay themselves, as well as the cost of a replacement worker. That is a frightening prospect for many small firms.
“Supposedly this plan is meant to be an incentive for businesses to get sick employees back to work, with annual savings of £50m. But it is negative for smaller firms and many are left in a state of limbo with increased costs.”
Ms Morris said she had concerns that some businesses in the region could become uneconomic.
She added: “I think it’s the small and medium sized enterprises which have the biggest worries. Take, for example, a small retailer in Birmingham where the owner employs one other person and that person goes on long term sick leave. The employer will be paying £86.70 in weekly contributions, unable to claim that cost back, and then either has to struggle on alone or bring in a temporary replacement. That’s is something they simply don’t have the budget for.
“Everyone can see the good intentions of the Government with the sick pay reforms. But the rules have only been here for a matter of weeks and already there are some gaping financial holes which really could threaten SMEs here in the West Midlands if changes are not addressed or the needs of small businesses are not taken into account.
“What is intended to be a money-saving scheme could backfire spectacularly.”
Ms Morris and her team are hosting a series of Employment Seminars where statutory sick pay will be debated. Those looking for advice can contact her through email@example.com.
According to the government around one million people in the UK are off work due to a long-term illness.