Time out | Reforming Statutory Sick Pay to support the Covid-19

Time out

Reforming Statutory Sick Pay to support

the Covid- recovery phase

Mike Brewer & Maja Gustafsson

December 

@resfoundationresolutionfoundation.org

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M Brewer & M Gustafsson, Time out:

Reforming Statutory Sick Pay to support the Covid-19 recovery phase, Resolution Foundation,

December 2020

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Acknowledgements

This paper has benefitted from discussion, comments and advice from

colleagues at the Resolution Foundation, particularly Gavin Kelly,

Torsten Bell and Adam Corlett. We are also very grateful to Leeds City

Council for their help with the Test and Trace Support Payment. All

views and errors remain those of the authors.

Time out | Reforming Statutory Sick Pay to support the Covid-19 recovery phase

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Summary

Even before the coronavirus crisis began, the UK was almost at the bottom of the

OECD league table for the generosity of Statutory Sick Pay (SSP) and its international

equivalents. Since the outbreak of coronavirus, the UK has fallen further down the

list. The eligibility criteria, leaving out 2 million of our lowest paid, and low replacement

rates mean people struggle to make do while on sick pay. This is a significant problem

for individuals’ livelihoods when they have to self-isolate or fall ill. Given the pressures

households have already dealt with over the past nine months due to the economic

fallout of the coronavirus crisis, it is unjustifiable to continue placing the financial burden

of self-isolating on the individual. And perhaps even more importantly, the pandemic has

meant the consequences of a poorly working sick pay system are more severe: going

to work with a cough can now be a question of life or death. The early evidence is stark:

during the first wave of Covid-19, the Office for National Statistics (ONS) found care

homes that paid sick pay were significantly less likely to have seen Covid-19 cases among

residents in the early weeks of the pandemic.

Some sensible changes have already been made, such as scrapping the four-day wait

for SSP, but there is more to do. A simple way to improve the situation would be to let

employers use the Job Retention Scheme (JRS) for workers who are ill with the virus

or need to self-isolate, allowing them to receive 80 per cent of their previous earnings.

This would mean that the median worker was entitled to £330 a week from the JRS

rather than £96 in SSP. We estimate this would cost around £314 million a month (with

additional payments of the JRS at £426 million, with an offsetting £112 million saving in

SSP) if 643,000 employees used the scheme. The JRS is due to end at the end of March,

but the JRS for self-isolation should be retained after that. To make sure that the lowest-

paid are covered with or without JRS, SSP should also be extended to all employees, by

permanently removing the need to have earned over £120 a week.

Self-employed workers who need to self-isolate are currently directed to the Self-

Employment Income Support Scheme (SEISS). This should be changed so that self-

employed workers who have to self-isolate can claim grants covering 10 or 14-day periods

of self-isolation, paid at 80 per cent of their previous earnings, and these self-isolation

SEISS should be extended beyond the end of March. If this cannot be done, then the

self-employed should continue to be directed to the existing SEISS scheme which pays

out grants covering 80 per cent of three months’ worth of earnings, and the Government

should introduce a mechanism for partially clawing back any excess grants.

The new Track and Trace Support Payment (TTSP) provides an additional way that policy

supports those on low incomes who need to self-isolate. But in its current form it is too

complex, too narrowly targeted and too reliant on additional funds from local authorities

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to have significant impact. If our suggested reforms to JRS and SEISS are implemented,

then there will be less need for TTSPs, but they should continue in order to provide

support for those who would otherwise be entitled to nothing. TTSPs should be extended

beyond 31 January, and entitlements granted to those who cannot work because their

children cannot attend school or notified to self-isolate via the NHS Covid app. The

Government should also review the formula for paying local authorities for discretionary

payments so that it relates directly to local infection rates.

The pandemic is showing the drawbacks of SSP, with its low levels of payment and its

system of determining support – a historical hangover from our old contributory system

– that means that low earners are entitled to nothing. Beyond the pandemic, we need to

rethink this important part of the welfare state safety net, and ask questions about its

generosity, recognising that its existence benefits us all.

Even before the current crisis, Statutory Sick Pay was poorly fit for

purpose

In normal times, Statutory Sick Pay (SSP) acts as the minimum – albeit a low one – of

financial support that employees should receive when they can’t work because of illness.

It amounts to just £95.85 per week in 2020-21 and is available for up to 28 weeks a year,

paid by the employer. To be covered, workers have to be classed as an employee or

agency worker and earn an average of at least £120 per week (this is the Lower Earnings

Limit (LEL) in the National Insurance system). Sick pay starts after four days of illness,

called ‘qualifying days’; and after seven days, the employee needs a ‘fit note’ from their GP.

The mandatory rates of sick pay in the UK are low when compared to those in other

countries. Before the outbreak of Covid-19, the average mandatory paid sick leave among

OECD countries replaced just over 60 per cent of an eligible employee’s wage

, and even

reached 100 per cent in a few countries including Austria, Iceland and Luxembourg. By

comparison, the replacement rate for a worker in the UK was just over 10 per cent, which

is higher only than South Korea and the United States, where employees do not have a

legal right to any sick pay at all.

In part, current SSP is a product of its history, rather than a system designed specifically

for its purpose. Originally, SSP was a full part of the social security system, with

the government reimbursing employers for most of the payments in a similar way

to Statutory Maternity Pay. But this stopped for large employers in 1993 and for all

1 The results refer to an eligible full-time private-sector employee who is: married with no children, age 40, earning an average

wage, has worked for the same employer for one year, and who cannot work from home. The replacement rate is calculated over a

four-week sickness spell.

2 S Scarpetta et al., OECD Policy Responses to Coronavirus (COVID-19): Paid sick leave to protect income, health and jobs through

the COVID-19 crisis, OECD, July 2020

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employers in 2014, and since then SSP has acted as a minimum payment that firms

must make to eligible employees when they are off sick. This half-baked benefit was not

adequate before the current crisis and is certainly not designed to deal with a pandemic.

The pandemic has highlighted pre-existing flaws in sick pay and

underlined its consequences

As more people have had to take time off for illness, so the pandemic has highlighted

the pre-existing flaws with SSP. But more importantly, many more families have also had

first-hand experience of the consequences of presenteeism this year than previously.

Because sick pay affects individuals’ ability to take time off work when they show

symptoms or are told to self-isolate, it will directly influence the rate of transmission of

Covid-19. Going to work with a cough was standard practice before the pandemic, but

can now be a matter of life and death. Very strikingly, during the first wave of Covid-19,

the Office for National Statistics (ONS) found that care homes paying sick pay were

significantly less likely to have seen Covid-19 cases among residents in the early weeks of

the pandemic.

The Government made some changes to SSP eligibility when Covid-19 hit, allowing

(qualifying) employees to receive support if they were told to self-isolate (as well as

when they were ill), and for it to be paid from the first day of Covid-related illness or self-

isolation, rather than day four (the old system remains in place for non-Covid-related

illness). Very sensibly, to help employers cope with the extra cost of SSP, the Government

is covering the cost of SSP payments for up to two weeks for small-to-medium

businesses through the SSP rebate scheme.

Two million of the lowest-paid workers are excluded from the

current SSP

The need to earn above the LEL, currently £120 a week, to qualify for any SSP means that

close to 2 million employees at the bottom of the earnings distribution are ineligible for

it.

Figure 1 shows the fraction of workers in different groups who are not able to claim SSP

if they fall ill or self-isolate. Because SSP eligibility is determined by weekly pay, those

who are not eligible are typically working in low-paid jobs or working part-time (or both).

This is clear in Figure 1 which shows that 25 per cent of part-time workers are ineligible.

In addition, the figure shows that women, younger and older workers, and workers with

atypical contracts are all more likely than the average worker to be ineligible, due to

3 ONS, Impact of coronavirus in care homes in England: 26 May to 19 June 2020, July 2020.

4 Gov.uk, Check if you can claim back Statutory Sick Pay paid to employees due to coronavirus (COVID-19), April 2020.

5 RF estimates based on ONS, Labour Force Survey.

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the higher incidence of low pay or low hours among these groups. Similarly, workers in

customer-facing industries are less likely than the average worker to be eligible, with

one-in-seven (16 per cent) workers in industries such as retail, hospitality, arts and leisure

being ineligible for SSP. It is particularly alarming that workers in sectors with a lot of

social interaction, or where workers are in regular close contact with vulnerable groups,

have relatively low coverage of SSP. It makes no sense, either for our economy or the

health of the population, to have a situation where the workers who are most at risk of

spreading the virus are not adequately supported to self-isolate when they may have

contracted it.

FIGURE 1: Women, people on insecure contracts and workers in sectors that

depend on social interaction are most likely to be ineligible for SSP

Proportion of employees earning below the Lower Earnings Limit, by selected

demographic groups: UK, 2019

NOTES: SSP covers all types of employment contracts, but employees on flexible or zero-hour contract

have to prove their average earnings, which can be a challenge. Therefore, these figures may underestimate

how many workers would receive SSP in case of illness. Atypical contracts include agency workers and

workers on temporary and zero-hour contracts.

SOURCE: RF analysis of ONS, Labour Force Survey.

Neither current SSP replacement rates nor personal finances allow

people to take time off ill

It is striking that the Government so far has not made any changes to the rates received

under SSP. This means that mandatory sick pay replacement rates in the UK have slipped

further down the international league table since the outbreak of the pandemic, as about

half the countries in the OECD have increased the replacement rates that employees

0% 5% 10% 15% 20% 25% 30%

Male

Female

Other sectors

Health and social care

Customer-facing sectors

Typical contracts

Atypical contracts

Full-time

Part-time

18-29

30-49

50-64

65+

White

Mixed/Multiple ethnic groups

Indian

Pakistani

Bangladeshi

Chinese

Any other Asian background

Black/African/Caribbean/Black British

Other ethnic group

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receive when they are ill or need to self-isolate because of Covid-19. For example, the US

put in place a mandatory sick pay for Covid-related self-isolation at a replacement rate

of 50 per cent of previous earnings, Finland increased their mandatory replacement rate

from 70 per cent to 100 per cent, New Zealand raised theirs from just over 30 per cent to

50 per cent, and Ireland doubled their replacement rate to nearly 40 per cent.

The level of SSP at £96 pounds per week means that, for those who earn just enough

to qualify (£120 per week), it provides a replacement rate of 80 per cent. But, as Figure 2

shows, the fixed rate of SSP means that replacement rates fall rapidly in higher earnings

deciles, so that SSP represents less than half of weekly earnings for all workers outside

the bottom earnings decile, and only a quarter of weekly earnings, on average.

FIGURE 2: Current Statutory Sick Pay covers just one-quarter of gross average

weekly earnings

Mean Statutory Sick Pay gross replacement rates for those earning above the LEL, by

weekly earnings deciles: UK, 2019

NOTES: Figures do not include workers earning below the LEL.

SOURCE: RF analysis of ONS, Labour Force Survey.

Some employees benefit from top-ups to these rates under occupational sick pay

schemes, but estimates from the Department for Work and Pensions (from 2014) are

that one quarter (26 per cent) rely on SSP alone when they are ill (a further 17 per cent

reported that they did not know what they were entitled to, meaning that the true

proportion getting only SSP could be higher). Breaking this figure down by demographic

6 S Scarpetta et al., OECD Policy Responses to Coronavirus (COVID-19): Paid sick leave to protect income, health and jobs through

the COVID-19 crisis, OECD, July 2020.

71%

49%

34%

27%

23%

20%

17%

14%

11%

24%

10%

20%

30%

40%

50%

60%

70%

80%

(Lowest)

2 3 4 5 6 7 8 9 10

(Highest)

All

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groups, as we do in Figure 3, shows a similar pattern to that observed in Figure 1. Among

workers who get some sick pay, the proportion who get only SSP and do not get any

occupational sick pay is higher in customer-facing occupations, with two-fifths (39 per

cent) of workers in caring, leisure and service occupations receiving only the statutory

minimum when ill. Reliance on SSP is also more prevalent among the youngest and

oldest workers, and for workers on atypical and part-time contracts.

FIGURE 3: One-quarter of workers receiving any sick pay rely solely on SSP

Proportion of eligible workers on different sick pay schemes, by selected demographic

groups: UK, 2014

NOTES: Figures do not include workers earning below the LEL.

SOURCE: RF analysis of DWP, Health in the workplace – patterns of sickness absence, employer support

and employment retention.

If SSP does not provide adequate earnings replacement when workers have to self-

isolate, then we are effectively asking them to fund self-isolation from their own

resources. But many families can’t afford to cover their bills if they lose a significant

portion of their income, even for a short period of time. Before the crisis started, one-

in-thirteen workers (7 per cent) said that they could make ends meet for no more than

a week if their household lost their main source of income, and a little more than twice

that (15 per cent) said that their household could make do without their main source of

income for more than a week but not for not a full month.

7 RF analysis of ONS, Wealth and Asset Survey. See also: G Bangham & J Leslie, Rainy days: An audit of household wealth and the

initial effects of the coronavirus crisis on saving and spending in Great Britain, Resolution Foundation, June 2020.

0% 20% 40% 60% 80% 100%

Male

Female

Caring Leisure and Service Occupations

Sales and Customer Service Occupations

Other

Permanent

Temporary

No contract/informal/casual

Part-time

Full-time

16-24

25-34

35-49

50-59

60-65

Over 65

White

Mixed

Black

Asian

Other

SSP Only Above SSP Don't know

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And the fact that the crisis is in its eighth month means that many households have

already had to draw on personal reserves.

In our latest survey, we saw that financial

stress is building. For example, more than four-in-ten (42 per cent) adults in September

reported using at least one form of borrowing (credit cards, borrowing from family and

the like) to cover everyday living costs. Most worryingly, this figure rises to over half (54

per cent) for those living in the lowest income families, indicating not only the pressure

such households are under currently, but also that a debt problem may be building.

With

this in mind, it is easy to understand that having to forego earnings in order to self-isolate

is becoming ever less tenable as the crisis continues.

The new Test and Trace Support Payment has patched up some of

the holes in SSP, but is narrowly targeted and overly complex

One step the Government has taken so far to recognise the costs incurred by workers

who self-isolate is the new £500 Test and Trace Support Payment (TTSP).

The TTSP is

available to employees or self-employed workers who are told by NHS Test and Trace to

self-isolate, and who are receiving one of a number of benefits targeted at low-income

families. The scheme will run until 31 January and there is currently little clarity on what

will happen after this.

Unfortunately, the TTSP does not address the wider problems of SSP. Potential eligibility

to the standard TTSP extends to only one-in-eight workers, and the payment is not

automatic but has to be claimed from the local authority.

Furthermore, workers are not

eligible if they are required to stay at home because their children have been told to self-

isolate because of an outbreak at school.

Although no systematic information has been released by the Government, it appears

that actual take-up so far has been low.

In addition, although local authorities have

the power to offer £500 discretionary payments to people in work and on a low income

who do not meet the criteria for the TTSP but would face financial hardship as a result

of not being able to work while self-isolating, the budgets allocated to them to fund

these do not bear any relation to the local rate of infection. In some cases, this means

that budgets intended to cover the period until 31 January have already been used up.

We discuss this more in Box 1, which draws on data provided to us covering the West

Yorkshire combined authority.

8 Ibid.

9 K Handscomb & L Judge, Caught in a (Covid) trap: Incomes, savings and spending through the coronavirus crisis, Resolution

Foundation, November 2020.

10 The TTSP is a specific scheme in England only, but the Scottish Self-Isolation Support Grant, the Welsh Self-Isolation Support

Scheme and the Discretionary Support Self-Isolation Grant in Northern Ireland similarly offer payments to those in need of

financial support to self-isolate.

11 D Tomlinson, Sorting it out: The Chancellor moves to fix the Job Support Scheme, Resolution Foundation, October 2020.

12 See for example a letter to the Chancellor from Anneliese Dodds MP.

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BOX 1: Test and Trace Support Payments and discretionary support

payments in West Yorkshire

So far, we have seen little if any data

on the success of TTSP and Local

Authorities’ discretionary grants,

although there has been plenty of

anecdotal evidence and speculation.

We have been able to see some

real-time data from West Yorkshire

on how the process has worked for

them, covering grants paid up to

25 November. The situation in West

Yorkshire may not be representative for

the country, not least because Yorkshire

and the Humber have had higher-than-

average levels of infection rates, but

early evidence from the region suggests

there are mismatch problems between

funding and need, especially as this

payment can be the main source of

support for some families being asked

to self-isolate.

Leeds, Bradford, Wakefield and

Calderdale have together received

funding for a total of 1,191 discretionary

support payments. In order to manage

this budget, Local Authorities have

added criteria to that specified by

the central government website.But

these criteria differ between different

Local Authorities, depending on the

funds available and the local need,

meaning that any small mismatch

between the level of funding and local

need generates a postcode lottery.

For example, Wakefield, with a current

estimated current infection rate of 1.91

per cent, had spent nearly 1.5 times

their discretionary budget by the end

of November. Bradford and Calderdale

both have estimated infection rates of

over 2 per cent and have each spent

more than their initial allocation of

TTSP (indicating that demand for TTSPs

is similar in the two areas), but the use

of their discretionary budgets is very

different: Bradford has spent nearly all

(97 per cent) of theirs by 25 November,

but Calderdale had spent only one-third

(33 per cent).

Devising local rules, seeking additional

internal funding and processing

payments at pace is resource-intensive

for Local Authorities. With the end of

the scheme approaching quickly, there

are important questions about how to

build on what we have learnt about this

scheme so far.

Employers should be allowed to use the Job Retention Scheme for

workers who need to self-isolate

More needs to be done if we are to safely loosen restrictions as we come out of

lockdown. NHS Track and Trace is key to the national strategy to limit the transmission of

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Covid-19, but research shows that adherence to test, trace and isolate behaviours after

testing positive for Covid-19 is low, with just under one-fifth (18.2 per cent) self-isolating.

Although this is not all due to low levels of sick pay, multiple studies from before the

pandemic show that levels of sick pay are important in determining whether contagious

people stay at home.

And even though vaccination has started to be rolled out, it will take a number of months

before we can return to our pre-coronavirus world: we require a community-level vaccine

coverage of over 80 per cent for herd immunity.

This means that financial support for self-isolation is likely to be an important

consideration throughout 2021, and is likely to influence the timing and pace of economic

re-opening and recovery.

One response to the low level of support provided by SSP to those who fall ill or self-

isolate would be to pay it to all employees, and make it proportional to earnings, so as

to boost the replacement rate. But there may be a quicker solution. Workers who are

furloughed are able to receive up to 80 per cent of their previous earnings through the

Coronavirus Job Retention Scheme, a far greater sum than is provided by SSP. Currently,

government guidance specifically says that the JRS should not be used for employees on

sick leave or self-isolating as a result of Covid-19. But this is a missed opportunity to use a

pre-existing structure that is already working well to support employers and employees in

the short term.

The Government should therefore extend the JRS so that it can be used flexibly for

workers who need to take short-term absences because of ill-health or the need to self-

isolate. This ability to use JRS for self-isolation should be made more flexible. First, the

constraint that employees have to have been on the payroll by end of October should

be scrapped. Second, JRS should be extended to parents of all children who are ill or

self-isolating, by including parents of children whose schools have told them to learn

remotely.

To prevent any fraudulent claims, employees could be asked to register an instruction

from NHS Test and Trace or an ‘isolation note’ from NHS 111, as is currently required

to certify Covid-related claimants of SSP, with a similar system used to verify that

parents need to be off work when their children need to self-isolate. To align employers’

incentives, the employer contribution to the JRS should be set to zero for those

employees using the JRS because of illness or self-isolation. The JRS is due to end at the

end of March, but JRS for self-isolation should be retained after that, given that Track and

Trace will continue to play an important role in keeping down the Covid-19 caseload into

the back end of next year as vaccination is rolled out.

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The amount of income replacement provided by the JRS and current SSP rates are

shown in Figure 4. Allowing a self-isolating worker to be on the JRS would mean that

the median worker was entitled to £330 a week rather than £96 in SSP, increasing the

replacement rate from around one-quarter to 80 per cent. This would significantly

change the support provided to employees when they have to self-isolate, as well as for

the first time providing support for the 2 million low-paid employees who are currently

not eligible for SSP.

We estimate the cost of this change would be around £314 million a month (with extra

spending on JRS of £426 million being offset with a £112 million saving in SSP). This can

be thought of as a central scenario where we assume that self-isolating workers receive

support only if they are not able to work from home, whereas people who fall ill with the

virus receive support regardless of whether they are able to work from home or not.

FIGURE 4: Self-isolating workers should be allowed to be put on the Job

Retention Scheme

Net weekly income replacement rate under JRS, Statutory Sick Pay and Universal

Credit

NOTES: Adults assumed to be aged 25+ and eligible for Universal Credit.

SOURCE: RF analysis using the RF microsimulation model.

Our suggestion to allow employers to use the JRS for sick or self-isolating employees

is intended to be a pragmatic suggestion that can be implemented quickly. But the

Government must still address the flaw in SSP that excludes those who earn below

£120 a week. Such a restriction – limiting payments to those who have previously paid

National Insurance contributions – is a historical echo of the UK’s old contributions-

SSP weekly

replacement rate

Universal Credit unemployment

replacement rate

JRS replacement rate

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

£0 £100 £200 £300 £400 £500 £600 £700 £800

Normal gross weekly earnings

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based insurance system. It has been a long-standing point of contention. Indeed, in 2019,

a government consultation proposed that SSP eligibility should be widened to include

those on the lowest incomes.

Despite calls to do so during this crisis (including from the

Resolution Foundation), the Government has not changed the earnings threshold.

This

needs to be abolished as soon as possible, with employees who earn less than £120 per

week being entitled to SSP amounting to 80 per cent of their average weekly earnings, in

line with the JRS replacement rate.

The self-employed should use a reformed self-isolation SEISS

Self-employed workers are not covered by SSP, and also would not be able to make use

of the JRS if that was extended to self-isolating workers. The recommended route open

to the self-employed who need to self-isolate is to claim via the Self-Employment Income

Support Scheme (SEISS).

The SEISS is currently made on a lump-sum basis, paying eligible self-employed workers

up to 80 per cent of three months’ trading profits.

An ideal system would pay the SEISS

for periods of less than three months so that, for example, a self-employed worker who

has to self-isolate for 10 (or 14) days receives 80 per cent of their previous income over 10

(or 14) days, not over three months (it is very hard to justify why SEISS should be allowed

to claim 80 per cent of three months’ worth of earnings even when self-isolating for

just 10 days, with the average SEISS payment being £2,518).

If such as system can be

implemented, then it should continue beyond 31 March 2021, until the crisis is over, in

line with our suggestions for the JRS for self-isolating workers.

However, if it is not possible to pay the SEISS over shorter intervals then, in the absence

of an easy alternative to provide income replacement for the self-employed who have to

self-isolate, the Government should continue to tell the self-employed to claim the SEISS

if they have lost income as a result of self-isolating. But in this case, it becomes even

more important to introduce a mechanism for partially clawing back some of the grants

13 DWP, Health is everyone’s business Proposals to reduce ill health-related July 2019, CP 134.

14 Resolution Foundation Analysis, Doing what it takes: Protecting firms and families from the economic impact of coronavirus,

Resolution foundation, March 2020; A Klair, Sick pay from day one is not enough - we need sick pay for all, TUC, March 2020. See

also a letter to the Government signed by 100 colleagues and taken up in a House of Commons debate on 18 March, where zero-

hours contract workers are emphasised as a vulnerable group.

15 Gov.uk lists SEISS as one key option for self-employed people needing to self-isolate because of contact with Covid-19, as self-

isolation is listed as one of options under the criteria “Previously trading but you are temporarily unable to do so”. Read more at

Gov.uk, Guidance: How your trading conditions affect your eligibility for the Self-Employment Income Support Scheme, updated

September 2020.

16 Read more at: Gov.uk, Guidance: Check if you can claim a grant through the Self-Employment Income Support Scheme, updated

September 2020.

17 SEISS figure combines both first and second grants. Source: RF analysis of HMRC, Coronavirus Job Retention Scheme statistics;

HMRC, Self-Employment Income Support Scheme statistics. See: Mike Brewer, N Cominetti, K Henehan, K Henehan, C McCurdy,

R Sehmi & H Slaughter, Jobs, jobs, jobs: Evaluating the effects of the current economic crisis on the UK labour market, Resolution

Foundation, October 2020.

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paid to self-employed workers who have seen their incomes actually rise this year while

claiming SEISS, as set out in previous Resolution Foundation research.

Those who have to self-isolate and do not qualify for JRS or SEISS

should use the welfare system, and a reformed TTSP

For workers who have to self-isolate and do not qualify for either the reformed JRS or

self-isolation SEISS, the welfare system acts as the final safety net.

In particular, any self-employed worker who cannot work because they are sick or

self-isolating and who has previously paid National Insurance contributions can claim

Employment Support Assistance (ESA).

But ESA was not increased by £20 a week when

rates of Universal Credit and tax credits were boosted in April 2020, and so it remains at

only £74.35 a week, even lower than SSP. On current policy, the rate will remain at this

lower level for 2021 (after an adjustment for inflation

) so, to support the self-employed

who have to self-isolate, the Government should reverse this decision and increase ESA

by £20 per week, bringing it in line with the current rates of Universal Credit (and this

boost should be made permanent).

As discussed above, self-isolating workers in receipt of certain benefits can claim the

TTSP, and others in work and on a low income and suffering hardship from self-isolating

may be entitled to discretionary payments. If our suggested reforms to JRS and SEISS

are implemented, then there will be less need for TTSPs, but they should continue, so as

to provide support for those who would otherwise be entitled to no support, particularly

the self-employed.

To make these more useful, TTSPs should be extended beyond

31 January, and continued alongside the other measures recommended in this note

until the end of the health crisis. Crucially, TTSPs should also be made available to

eligible parents of all children who are ill or need to self-isolate, regardless of whether

this information is given by NHS Track and Trace or individual schools. Finally, the

Government should review the formula for paying local authorities for discretionary

payments so it relates directly to local infection rates.

Sick pay needs to be seen again as a collective benefit

18 G Bangham, A Corlett, J Leslie, C Pacitti & J Smith, Unhealthy finances: How to support the economywww today and repair the

public finances tomorrow, Resolution Foundation, November 2020.

19 To make ESA more useful during the current crisis, the Government removed the seven-day waiting period so that claimants can

receive benefits from their first day of sickness. ESA can also now be claimed by self-employed workers who are asked by NHS

Track and Trace to self-isolate, or whose children have been asked to self-isolate. In addition, employed and self-employed workers

whose income is reduced sufficiently when self-isolating will be able to claim Universal Credit. But many will find they have no

entitlement, because UC payments depend upon the income of any partner and the amount of savings in the family.

20 DWP written statement, Social Security Benefit and Pension Up-rating 2021/22, November 2020, UK Parliament.

21 Figures provided to us covering Leeds shows that the self-employed were slightly more likely to claim TTSPs than employees (25

per cent of claimants were self-employed, compared to a regional average of 17 per cent), perhaps reflecting that the self-employed

cannot get any sick pay at all.

Time out | Reforming Statutory Sick Pay to support the Covid-19 recovery phase

Resolution Foundation

In some ways, SSP typifies the worst aspects of the British system of benefits, with its low

levels of payment, but also continues with a historical hangover from our old contributory

system that means that low earners are entitled to nothing. The pandemic has shown

clearly the limitations of such a system. As the health of each of us and our family

depend on the ability of our colleagues to self-isolate, sick pay is rightly being seen again

as a collective benefit.

In the short term, there is an urgent need to shift incentives toward staying at home

instead of going to work for those who may have contracted Covid-19. Such a shift is

crucial if we are to safely come out of lockdown and start getting on with the recovery

in the new year. In the near term we have – in the JRS – a ready-made vehicle to support

those needing to self-isolate. But the issues with SSP brought to light in this crisis run

deeper than this, and in the longer term we need to move to a system that is fit for

purpose.

Time out | Reforming Statutory Sick Pay to support the Covid-19 recovery phase

Resolution Foundation

The Resolution Foundation is an independent think-tank focused

on improving living standards for those on low to middle incomes.

We work across a wide range of economic and social policy areas,

combining our core purpose with a commitment to analytical rigour.

These twin pillars of rigour and purpose underpin everything we do

and make us the leading UK authority on securing widely-shared

economic growth.

The Foundation’s established work programme focuses on incomes,

inequality and poverty; jobs, skills and pay; housing; wealth and

assets; tax and welfare; public spending and the shape of the state,

and economic growth.

For more information on this report, contact:

Maja Gustafsson

Researcher

maja.gustafsson@resolutionfoundation.org

Resolution Foundation, 2 Queen Anne’s Gate , London, SW1H 9AA

Charity Number: 1114839 | resolutionfoundation.org/publications