Sick pay reform under consideration

 

Minister for Social Protection Joan Burton is still actively considering shifting the burden of paying sick employees from the State to employers for the first weeks of sickness.

Ms Burton floated the idea in advance of last December's Budget. But amid criticism from employers and from Fine Gael Deputies the measure was not included in the Budget.

The Department of Social Protection has today hosted a consultative forum on introducing a statutory sick pay scheme in Ireland, during which expert speakers have outlined the comparative schemes in operation in other countries.

Speaking during the forum, Ms Burton pointed out that illness benefit and disability benefits were costing the State €1.8 billion a year and that there was also a hole in the social insurance fund, which amounted to €1.5 billion last year.

She said the programme agreed with the Troika necessitated significant cuts in the social welfare budget. The simple choice facing the Government on the issue of sick pay, she said, was to increase PRSI rates, reduce benefits or introduce statutory sick pay.

The latter solution would mean that employers shared some of the costs but it would also give them control over the management of the costs. She confirmed it was an option she was considering.

Ms Burton said it was the beginning of the consultative process with employers and nothing had been decided yet. If statutory sick pay were to be introduced it could entail the employer being asked to continue paying the employee for periods between the first week of sickness, for up to the first four weeks of illness. The annual saving to the Exchequer would be €23 million if the employer paid for the first week, or €89 million if the employer paid for the first four weeks. She said that exemptions from the requirement for smaller employers would also form part of the consultative process.

"Nothing has been finalised. I would like to see reforms in the Irish system that put an emphasis on wellness," said Ms Burton, who added she would like to see the reforms in place in time for next December's Budget.

The Small Firms Association condemned the proposal to pass on the cost of illness directly to employers. It said a suggestion by Ms Burton that Ireland was out of line with international practice on sick pay was not correct.

“For example, in our nearest competitor market, Northern Ireland, whilst employers do make the initial sick pay payment, they are able to offset this against their PAYE tax bill later,” Small Firms Association director Patricia Callan said.

“Small businesses are already struggling to maintain jobs, and any measures that add directly to the cost of employment will result in job losses and will act as a strong disincentive to job creation.”

One of the keynote speakers, Dame Carol Black, the UK's national director of health and work, examined the question as to whether a statutory sick pay system contribute to people slipping from a sickness absence from work into a benefit system type situation.

She told the conference that early intervention was crucial with four weeks being the key dates. She said that the research of her group had shown that if there were long periods of waiting around and the period of absence increased to 20 weeks, then the chances of the employee going back to work was greatly reduced.

Dame Carol said one of the recommendations made by her team was statutory sick pay was being paid at too close a rate to benefit and for too long a period. It was better, the group concluded to pay it at a hgiher rate for a shorter period.

She said identified another signal improvement as the employee's GP writing a much more comprehensive 'sick note' that would include capacity as well as incapacity. If employers invested in the wellbeing of staff it would result in productivity gain, she also said.

John Martin, the deputy director of the OECD, said that the sickness benefit system in Ireland had a number of characteristics that made it an outlier compared to other OECD countries.

The first, he said, was the lack of an employer pay-in period - employers pay illness benefit for only the first three days.

"Most employers pay for 15 weeks in Canada and for two years or more in Sweden," he said.

He also said Ireland was unusual in that its benefit was low, at under 50 per cent of the average wage. Across OECD countries it ranged from 50 per cent up to 100 per cent of wages, the latter in countries such as Luxembourg and Norway.

As against that, he continued, the duration of benefit, he said, "rather long in Ireland compared to the average in the OECD where it is a year or less. In Ireland it is still two years.

"It is a system where we have many sickness certificates being issued but no real interaction between employers and public authorities," he said.

"There has been a significant increase in public spending on sickness and disability. That is not unique to Ireland. The worrying aspect of it is that many people with frequent sickness absences tend to drift form sickness system into disability benefit system. It is bad for the families concerned.

"[Another] worrying trend is that more and more younger people are going from the sickness system into disability benefit system," he added.