Are SSP and NI on the way out?
By Neil Wilson
There are rumours circulating about plans to change the way we deal with sick pay.
At present there isn’t much detail to go on. Just a mooted idea from Work and Pensions Secretary Iain Duncan Smith, that has apparently received the nod from the Prime Minister, to scrap the current system of Statutory Sick Pay and replace it with a ‘fund’ we pay into every month that would cover us when we were ill.
Whether there would be some form of SSP left for those on low incomes who couldn’t put money aside, I have no idea. Whether the fund is insurance-based or relies on cold-hard, presumably invested, cash is also a mystery.
SSP is currently paid by your employer for a period of up to 28 weeks and reclaimed back from through the tax system. If you’re lucky your employer will leave you on full pay for a couple of months. If you’re unlucky they won’t have a scheme to keep your wages at their normal level while they pay for someone else to do your job and you’ll be straight on SSP after four days.
Why is this coming about now?
National Insurance looks to be on its way out. Sure, the state running an insurance scheme to cover us if we’re unemployed, ill and when we retire, sounds like a great idea. Or at least it did in the 1940s. The sad truth is that the population pyramid is becoming a square, making National Insurance largely defunct as a concept. An aging population, brought about mostly because of superb innovation in medicine, meant that people soon started taking out more than they had ever put in.
The Government first acknowledged NI’s shortcomings with the introduction of auto-enrolment so this should come as no surprise, but what effect will it have?
We’re still unclear as to where this is going. The abolition of NI would have a profound effect on payroll, obviously, but sickness savings could also play out in the same way that auto-enrolment has. I would expect to see a further increase in the personal allowance to offset savings being made, this being the only way to ensure that people aren’t left out of pocket. The introduction could be staged as well, much like auto-enrolment has been.
Personally speaking, if I had the choice between relying on SSP or getting my taxes cut to save for my own sickness I’d always choose the later. My reasoning for this is quite simple. I don‘t know where I’ll be working in a few years. Will it be somewhere where I be able to live on full pay if I get ill, or will I be stuck with SSP? At least if I’ve been putting money aside for myself I know that it will be there when I need it.
From an employer’s perspective there are clear benefits. Clear incentives exist in this mooted new system to prevent employees from ‘swinging the lead’. Again, personally speaking, if I’m paying for myself to be sick I’m much more inclined to look after myself and avoid taking unnecessary sick days. I could also be safe in the knowledge that colleagues aren’t going to take themselves off to the doctor every five minutes for a sick note, leaving me to pick up the work, as they would have a clearer incentive to get on with it. Overall, sick days should come down, meaning less admin work and more actual work being done by the employee.
The overall message is to ‘watch this space’ but there is much to consider.