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Sick pay vs group income protection

May 30, 2018

Last year I wrote about the Matthew Taylor Review into Modern Working Practices and this year the Department for Business, Energy and Industrial Strategy (BEIS) produced its response.

Most of the commentary focused on the decision not to change the tax arrangements for self-employed people however their response covered a lot more.

Of particular interest to protection insurance providers are their plans on workplace statements for employees and that more people in the gig economy should have the right to move to more permanent employment arrangements – with the same rights on employer statements of their entitlements – as other workers.

Building Resilient Households

As some readers will know I have been working on a project known as Building Resilient Households which is exploring how to encourage people to prepare themselves in the event of income shocks – especially sickness absence from work.

One of the obstacles to this is a lack of knowledge on what sick pay entitlements people may have and what the State will and will not provide.

On the second point it is worth noting that from this month the benefits system will no longer provide payments to support mortgage interest. Instead the only support will be a loan, charged against their property.

The Department of Work and Pensions have already indicated that they support workplace statements on sick pay entitlement and the fact that BEIS are also now moving to make this a reality is very good news. In fact, BEIS launched a consultation entitled “Measures to Increase Transparency in the UK Labour Market”.

Transparency

There are many businesses that already promote transparency in their employment relations.

There are also examples, however, where a lack of transparency has had a negative impact, leading workers to face concerns over insecurity of work and resulting in reduced workforce engagement and lower productivity.

Current legislation requires an employer to give employees whose employment has continued for at least one month a ‘written statement of employment particulars’.

The Written Statements Directive was transposed in 1993 in Great Britain and it is embodied in the Employment Rights Act 1996 (ERA). It builds upon the legislative framework the UK already had in place via the Contracts of Employment Act 1963.

Group income protection

The written statement currently consists of a ‘principal statement’ in which a certain subset of information must be contained all in one document.

Examples of what must be included are hours of work and holiday entitlement (and if that includes public holidays). However the written statement doesn’t need to cover sick pay – but it must say where the information can be found. In practice, the effect is that many employees do not know their sick pay entitlement.

The consultation proposes that this should change. They are also consulting on other information that could be included, for example all remuneration (not just pay). Although it is not specifically mentioned, I think there is a good case for group income protection to be included here.

Consultation response

Times have changed. In the past, GIP was often kept secret from employees and seen as a purely financial matter.

Today, a key feature of GIP is the provision of rehabilitation and GIP is seen as an employee benefit.

We have also seen a growing individual IP market. This market could grow further if people were clear about exactly what support they would get from their employers in the event of sickness absence and in turn help households become more resilient to this income shock.

Written by Richard Walsh, SAMI Fellow and first published in Cover magazine, April 2018

The views expressed are those of the author and not necessarily of SAMI Consulting.

 

For nearly 30 years, SAMI Consulting  has been helping clients think about the future. We have undertaken more than 250 foresight and scenario planning projects for a wide range of UK and international organisations. Our core skill is providing the link between futures research and strategy, helping clients to understand key drivers of change and manage uncertainty.

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