Report: 4.1bn boost to UK businesses, Government and the wider economy from sick pay reform

A new report by WPI Economics predicts that sick pay reforms would result in a 4.1bn boost to UK businesses, Government and the wider economy, as it lays out the benefits that could be realised by reforming the UK’s sick pay policy. MPs, Peers, FTSE100 company Legal and General Group, Unison Trade union, cancer and mental health charities will join the launch of the report in Parliament on Tuesday.

  • The UK would benefit from a boost of up to £4.1 billion if every worker relying on Statutory Sick Pay (SSP) received a higher rate of employer sick pay from day one. [1]
  • Workers on SSP receive as little as £1.10 an hour in the first week and less than £3 an hour thereafter. One in three workers on sick pay are living in poverty. 
  • MPs, health experts and business leaders call on the Government to take actions on sick pay findings to ‘safeguard the future health and prosperity of our nation’ amidst worsening UK workforce health. 


A report released today by WPI Economics, commissioned by the Centre for Progressive Change, finds that reforming sick pay could reduce sickness absence, presenteeism and the number of people on long-term benefits as well as boosting productivity.


The research estimates business costs of three potential reforms of the Sick Pay System.


  • Day one sick pay. This would remove the waiting days requirement, so that people can claim SSP from the first day of sickness absence;
  • Removing the lower earnings threshold, so that people can claim SSP regardless of the level of their earnings; and
  • Increasing the rate of SSP. The report provides a range of scenarios including paying the real Living Wage, the National Living Wage (NLW) and 75% of the NLW. 


The positive effects of sick pay reform would particularly benefit the increasing proportion of the UK workforce managing long-term conditions and ensure fewer workers fall out of the job market entirely. The evidence found that the direct costs of increasing sick pay were outweighed by the benefits, which include increased productivity, fewer periods of prolonged absence due to exacerbating existing conditions and better public health outcomes, because people are not spreading illness by coming into work sick. 


Overall benefits to business slightly outweighed business costs, whilst the gains to Government and the wider economy were larger thanks to positive outcomes associated with reducing the benefits bill, and boosting labour supply. Broader benefits including the potential to reduce NHS costs would raise these benefits further. The research looked at each measure proposed and based the analysis on a conservative assessment of the wider evidence base. 


The report recommended, in line with the policy practices of other advanced economies, that some of the direct costs accrued to businesses could be reduced by the Government sharing some of the gains through a form of business rebate for smaller employers.


The wider evidence base on positive outcomes finds that:


  • Generous paid sick leave policies are shown to decrease influenza-like illness rates by as much as 23.5% in the population. 
  • Access to paid sick leave greatly increases the odds that a sick employee will come back to work once they recover, with one study of cancer patients finding they were three times more likely to return to work with adequate sick leave. 
  • Workers with access to paid sick leave were found to be 28% less likely to be injured than those without it, resulting in reduced costs to the NHS.    


Matthew Oakley, Director of WPI Economics said “The UK’s sick pay system is just not working. This evidence shows that reforms would be a win for workers, businesses and Government alike. Even with a conservative approach to estimating the benefits of policy change, we found that these significantly outweigh the short-term costs.”


Sir Robert Buckland, MP for South Swindon said: “Improving workers' sick pay is a win-win policy for Rishi Sunak, supporting hard-working people and boosting our post-pandemic economic recovery. The Government should act now on this welcome evidence in order to safeguard the future health and prosperity of our nation.”


Amanda Walters, Director of the Safe Sick Pay Campaign said: “Making sick pay available for everyone from the first day of illness should be a minimum guarantee if we want a healthy, productive workforce. We are asking the Government to act now on this important reform and ensure that hard working people get the support they need to rest, recover and return to work.”


UNISON general secretary Christina McAnea said: “The pandemic underlined how sick pay needs a total overhaul. Those earning the least often don’t qualify, or they face such a huge drop in wages they could risk working when they shouldn’t. Anyone who’s ill should be given sick pay from the first day. That way, those on poverty wages, such as care workers, won’t go into work when it’s not safe because they’re worried about their bills.”


John Godfrey, Director of Levelling Up, Legal and General Group, which is in the process of implementing sick pay changes across its investment and property businesses said: “Improving the health of the UK workforce means tackling the social determinants of health, like housing, access to education, and, crucially, good quality employment, because there is an undeniable relationship between work and health. The benefits of the whole economy engaging in achieving better health outcomes are clear; if businesses, investors, and policymakers play their part, we will see lasting, tangible improvements across society and the economy.”


The Safe Sick Pay campaign has called for measures to be brought forward in the forthcoming Autumn Statement, pointing to some of the horrific experiences of some workers affected by the current regime including one cancer patient who was left without sufficient income to pay the rent as he went through his treatment. 


Dan, a cancer patient and former assistant manager at a supermarket said: “A lack of adequate sick pay was a factor in my subsequent mental health problems and decision to quit my job and take a prolonged period out of work to recover.”