The UK’s smallest businesses could be sent bankrupt if plans to reform statutory sick pay regulations go ahead.
Baker Tilly has warned that planned reforms to the statutory sick pay (SSP) regime could seriously harm the nation’s start-ups and SMEs if new rulings prevent them from recovering the costs of long-term illness among their workers.
The abolition of the Percentage Threshold Scheme (PTS) – which currently allows the employer to recover the SSP paid to employees if payments exceed 13 per cent of the total National Insurance bill for the period – is due to happen on 6th April 2014.
This is due to a review conducted by Dame Carol Black and David which investigated ways to reduce sickness absence in the workplace. In their report last year they indicated that PTS “reduces incentives to manage absence”.
David Heaton, senior tax figure and partner at Baker Tilly, is concerned that the removal of PTS will leave the smallest businesses susceptible.
“From April, statutory sick pay will be £87.55 per week, so if one employee is absent for a long period, the bill will be a maximum of £2,450 for 28 weeks or more of absence,” said Heaton.
“This is a huge burden for a small business to bear and I fear this will make some businesses uneconomic.”
Mr Heaton also cited a recent case where a childrens’ nursery, of two employees, had one off work and paid SSP as a result of chemotherapy treatment for cancer.
Heaton says the nursery now faces bearing the full cost of paying SSP for the maximum period, as well as covering the costs of hiring cover staff.
HM Revenue and Customs (HMRC) figures suggest 100,000 employers claim reimbursement through the PTS, with the average payment standing at £500 per annum, per employer.
The overall cost of PTS is said to be £50 million per annum, with HMRC estimating the administrative burden costing employers up to £5 million a year.
The Government has confirmed it will push the £50 million PTS funding into a new Health & Work Service (HWS) to which any employee off on sick leave for more than four weeks must be referred.
The HWS, which could come in to play from late 2014, will offer occupational health assessments and advice to employers who currently have limited access to professional opinions in-house.
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