Making statutory sick pay work

The case for going further to support healthier working lives

When people are unwell and unable to work, their income matters for their recovery. Statutory sick pay (SSP) provides a minimum level of financial support – set by government and paid by employers – during sickness absence. Some employers offer extra help. But when sick pay is too low, it can harm health, increase the risk of leaving work and widen health and income gaps. It also creates costs for employers from lower productivity and higher staff turnover.

The government's Employment Rights Bill aims to address two long-standing problems with SSP: too many lower-paid workers are excluded, and support starts too late. But the Bill overlooks a third, crucial problem: the rate of SSP remains too low. 

The Bill, now being discussed in the House of Lords, proposes removing the lower earnings limit (the minimum amount someone must be paid to qualify for SSP) and the 3-day waiting period. These changes would extend eligibility to 1.3 million additional workers and entitle employees to sick pay from their first day off sick, regardless of earnings. Still, a higher SSP rate is needed to better protect workers against financial strain, reduce the risk of health-related job loss and strengthen incentives for employers to support health at work and manage absences effectively. This need will grow, with 680,000 more working-age adults in England projected to be living with major illness between 2019 and 2040. 

This analysis explains why the current reforms, though significant, do not go far enough and outlines a path towards a fairer and more effective SSP system.

The current flat rate of SSP provides little financial protection for workers who are unwell and unable to work, increasing their risk of hardship or returning before they are well enough. Either outcome can further harm health.

SSP, wholly paid by employers, provides £118.75 a week for up to 28 weeks – less than a fifth (18%) of the average weekly spending of households with a full-time employee (£678). Among lower-income households, average weekly spending on basic essentials like food, housing, fuel and power alone exceeds this amount. This leaves workers who rely on SSP financially exposed during periods of illness, with wider consequences for individuals, employers and the state.

Each year, around 1.2 million people in the UK experience a period of long-term sickness absence lasting 4 weeks or more. For some, this marks the beginning of a journey out of work altogether – 120,000 people leave their job each year after being off sick for 4 weeks or longer, with half exiting within the first 3 months. Without the right support, people with health challenges risk being out of work long term.

Adequate sick pay plays a crucial role in preventing this. When workers are financially supported during sickness absence, they are more able to recover, take part in rehabilitation and return to work safely and sustainably. In contrast, low sick pay can create financial pressure at a time of poor health, forcing people to choose between working while unwell, leaving work or relying on the wider welfare system.

A personal account from recent research illustrates the real-world consequences:

‘If sick pay had been enough, I think I would've been able to return to work, but instead, my condition worsened drastically... and I ended up in the worst state, mental health-wise, that I have ever been in, forcing me to claim PIP [personal independence payment] and be unemployed for the past year and a half.’

While income-related benefits can help during times of need, they are not a substitute for adequate sick pay. Available data suggests that most workers who receive SSP do not also receive Universal Credit or similar benefits – in 2022, only around 14% did. Even those who qualify face a wait for support, with at least a month’s delay if making a new claim. These gaps can leave people without enough money when they need it most.

The current SSP rate also stands in sharp contrast to progress made on the minimum wage. While the minimum wage has been raised significantly over time, the uprating of sick pay has not kept pace. In 1999, SSP replaced 43% of the weekly earnings of a full-time minimum wage worker. Today, it replaces just 27% (Figure 1). This widening gap leaves lower-paid workers particularly exposed to income shocks caused by poor health.

The UK is not only falling short of its own aim to provide a basic level of income protection for sick workers, it also lags far behind its peers internationally. OECD data show that UK minimum sick pay rates are among the lowest in developed economies (Figure 2).

In 2019, the UK ranked 36 out of 38 OECD countries for the proportion of income replaced through mandatory sick pay – whether paid by employers, the state or, as in many cases, a combination – ahead of only South Korea and the US (where employees have no legal right to sick pay at a national level). 

The recent uprating of SSP has kept pace with prices but has not meaningfully increased its real-terms value. The proposed removal of the 3-day waiting period would raise the minimum level of income protection – but nowhere near enough to close the gap with other countries. For a 2-week absence, the percentage of income replaced for an average full-time private sector worker would rise from just 9% to 13%.

Although sickness absence in the UK has increased recently, rates remain low compared with most European countries. While some countries with very high income replacement rates do report higher absence levels, international evidence shows that more generous sick pay does not necessarily lead to more long-term absences or significantly higher costs. In the UK, low absence rates also partly reflect the fact that some workers cannot afford to take time off when ill. Well-designed systems strike a balance, providing financial security during periods of ill health while also supporting timely returns to work. 

The OECD average income replacement rate during short-term sickness absence is around 65%, suggesting the UK has significant scope to strengthen sick pay without risking its relatively strong employment outcomes. 

SSP is the legal minimum sick pay rate. While individual UK employers can offer more generous sick pay, this is voluntary and varies widely by sector, occupation and contract type. In practice, many workers – particularly those in lower-paid roles – rely on SSP with little or no extra income protection.

Data collected in 2018 for the Department for Work and Pensions suggest that around 42% of employees rely on SSP, while 52% receive more generous sick pay. Reliance on SSP is higher among workers for smaller employers and in sectors such as hospitality, retail and construction – often reflecting competitive pressures and industry norms. 

With a significant proportion of workers relying on SSP, it is important to consider the wider consequences of setting it too low. These extend beyond individual hardship to affect health, employment outcomes and the way businesses operate:

• Health – inadequate sick pay encourages ‘presenteeism’, where workers continue to work despite illness. This can prolong recovery and increase the risk of complications. By discouraging people from staying home when contagious, it also raises the risk of infections spreading within workplaces.
• Employment – low sick pay can force workers to leave employment prematurely or transition onto long-term benefits. Earlier Department for Work and Pensions research found that many people moved directly from work to incapacity benefits without effective support during sickness absence.
• Business – as well as costs linked to productivity and staff turnover, the current low SSP rate also creates an uneven playing field for businesses. Employers offering better sick pay take on higher upfront costs, while those relying on the statutory minimum avoid them – weakening incentives to prevent sickness absence and support employee health, particularly in sectors with high staff turnover.

Of course, raising the level of employer-provided sick pay would increase what employers pay out during periods of sickness. Yet the scale of this potential increase would be modest compared to overall wage costs – and significantly smaller than the recent rise in employer National Insurance contributions, expected to add just under 2% to payroll costs.

Modelling by the Resolution Foundation for the Health Foundation suggests that, based on current sickness absence patterns, replacing the flat rate of SSP with a scheme paying 60% of usual earnings would increase employer spending to around £1.1bn a year (equivalent to 0.11% of the national wage bill; see Figure 3). A scheme paying 80% would increase this to £1.5bn (0.15%).

If more generous SSP led to far higher rates of sickness absence, the immediate employer spend on sick pay could rise to between £2.7bn and £3.6bn a year – up to 0.36% of the total wage bill. However, these are upper-end estimates based on absence rates doubling and do not account for longer term gains such as improved productivity or staff retention. In practice, changes in absence rates would also depend on how well employers support and manage returns to work.

Given the current pressures facing businesses and the importance of getting policy design right, the Health Foundation’s Commission for Healthier Working Lives has recommended a structured, phased approach to further SSP reform. A formal review during this parliamentary term could assess the impact of the upcoming changes in the Employment Rights Bill and set a course towards a sick pay rate closer to the 60–80% earnings replacement typically seen in other countries. This review should consider:

• the adequacy of financial support under potential alternative SSP schemes and their impact on worker and employer behaviour
• options for sharing the costs of sick pay between employers and the state, such as targeted rebates or subsidies, particularly for smaller businesses and those that actively support people to return to work
• the flexibility of payments, including options to combine SSP with usual pay to further support phased returns to work
• how sick pay reforms fit with a more proactive and preventative welfare system, including interaction with Universal Credit payments. 

The government has acknowledged the need to monitor its planned SSP reforms. But without addressing the adequacy of the rate itself, many of the underlying challenges are likely to remain.

The Employment Rights Bill makes welcome progress on sick pay coverage. Yet unless further action is taken to increase the SSP rate, the system will leave too many workers without the financial support needed during periods of ill health.

A full review of SSP rates during this parliament – with a goal of improving workers’ financial security and supporting participation in work – would help the government meet its ambitions to make work pay, strengthen the economy and reduce health-related job loss. It would also offer clarity on future policy and give employers greater confidence to plan and implement changes, with potential gains for staff retention and productivity over time.

Crucially, strengthening sick pay is not only about preventing individual hardship – it is a practical step towards a healthier, more inclusive labour market. A stronger, well-designed sick pay system supports people to manage their health and remain in work.