Sick pay day one warning to Sunderland's smaller businesses

A new package of workers’ rights, starting next April, includes removing the lower earnings limit on statutory sick pay (SSP), meaning more people than ever will be in receipt of SSP when they are unable to work due to illness.

“As well-intentioned as this policy is, it is likely to financially impact local employers, especially smaller businesses with employees on low wages, minimal hours or part-time contracts,” warned Stephen Abbotts, Director of Payroll Services at UK top 10 accountancy and business advisory Azets.

“Many firms are already under financial strain following the costly increase in national insurance contributions since the spring, along with the rises in the National Living Wage and the National Minimum Wage.

“There have been reports of hire freezes and a fall in payrolled employees as they try to balance the books – and that’s before they face paying employees who will be entitled to sick pay from day one of their job start date from next April, removing the current three unpaid waiting days.

“Furthermore, hundreds of companies have been named publicly by HMRC for underpaying staff wages, even by as little as 3p a week per an employee - payroll compliance is essential and cannot be fudged.”

Stephen added: “We are already in discussions with worried businesses, from an employer solutions perspective, to look at options which help with tax/cost savings to alleviate additional costs to employers.”

Azets has regional offices in Durham, Newcastle and Wynard.

The policy rationale by the Department for Business and Trade for the changes to SSP is to ensure all workers can afford to recover from illness without financial hardship.

Other measures that take effect next April include collective redundancy protective award -doubling the maximum period of the protective award - and ‘Day 1' paternity leave and unpaid parental leave.

In part of a Ministerial foreword to Implementing the Employment Rights Bill – our roadmap for delivering change,Angela Rayner MP, Deputy Prime Minister, and Jonathan Reynolds MP, Secretary of State for Business and Trade, stated: “Measures such as a ban on exploitative zero hours contracts, the end of unscrupulous fire and rehire practices, parental leave and protections from unfair dismissal from day one will be truly transformative for many.

“Up to 1.3 million working people – some of the country’s lowest-paid employees – will get access to Statutory Sick Pay for the very first time.

“This is on top of the large pay rise that over three million people received in April through increases in the National Living Wage, worth an extra £1,400 per year for an eligible full-time worker, and the National Minimum Wage.

“As a result, businesses of all sizes who are already doing the right thing will no longer be undercut by those who don’t, raising the bar all round.

“All of which adds up to not just a new deal for working people, but also for business.”

According to figures from Parliament, there were just over 34 million people aged 16 and above in employment from February to April in the UK.

Of the 5.5 million businesses in the UK, the vast majority are small, employing from 0 to 49 people, with 37,800 medium-sized businesses employing between 50 to 249 and, classed as large with 250 or more staff, 8,250 companies.

There are 1.16 million micro businesses with between one and 9 staff.

Stephen said: “It is the smaller businesses that are likely to be exposed most to the new changes because they often don’t have the deep cash reserves like the larger ones.

"The new package of workers’ rights from April risks breaking the camel’s back for some.”