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In an age of essential and efficient spending how can the next Government help business manage sickness?

Helen White, ABI Helen White, ABI

Although the General Election campaign has only just officially begun, the de facto campaign feels like it got underway months ago. Over that time we have heard ad nauseam how each party will cut the deficit, whose cuts are fairer and who is better for business.

The next Government, whatever its hue, will have to prove it can do all three and more. But following the abolition of the statutory sick pay ‘Percentage Threshold Scheme’ in 2013 one such question should be a priority: how can Government continue to support businesses in managing sickness absence after the ability to recover Statutory Sick Pay (SSP) ends next year?

In January 2013 the Government’s report, ‘Fitness for work: the Government response to ‘Health at work - an independent review of sickness absence’, concluded that the Statutory Sick Pay ‘Percentage Threshold Scheme’ has not encouraged employers to manage sickness absence in the workplace. As a result, employers have only one year left to recover some of the SSP paid to employees for sickness absences occurring before 2013/14.

Income Protection, or IP for short, provides an income to individuals when they are unable to perform their jobs due to severe sickness or injury.

What’s the upshot? Government could wash its hands of the issue, leaving it to employers to find alternative ways to manage sickness absences in the workplace whilst looking after their staff, helping them back to work and, crucially, reducing the financial burden. Alternatively, Government could partner with insurers by encouraging the uptake of Income Protection insurance in the workplace. Income Protection, or IP for short, provides an income to individuals when they are unable to perform their jobs due to severe sickness or injury. This removes the burden from employers, provides a long term income to workers and saves the Government money by virtue of the insurer covering the cost, instead of the employer or the state.

It gets better. Insurers also help workers return to work when possible by providing various types of rehabilitation and in some cases are able to intervene to prevent employees leaving work. When an individual is unable to return to their job, insurers are able to help re-train them so they can return to work in a new capacity. If there is a discrepancy between their old and new salaries, the insurer will pay the difference. These benefits are demonstrated by the excellent charity led campaign, ‘7 Families’, set up by the Income Protection Task Force and Disability Rights UK.

It can be argued that the cost of premiums is outweighed by the benefits: removing the financial impact of losing and replacing employees, retaining experience and supporting employees when severe illness or injury strikes.

If the new Government after May 7th wants to preach and practice fiscal responsibility whilst also supporting businesses, it needs to communicate to employers that soon they will no longer be able to reclaim SSP and they need to make other provisions. It could then partner with insurers, as they have done with pensions and flooding, to support employers and employees through periods of sickness and ill health. A greater partnership can help Government meet its aims of saving the taxpayer money whilst supporting both businesses and workers through sickness absence.

Helen White is Head of Protection and Health Insurance at the Association of British Insurers.

This article originally featured in Money Marketing.

Last updated 29/06/2016