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The Progressive Policy Think Tank

UK sickness absence costing state and employers £23.5 billion a year - IPPR

One-in-two people now on sickness benefits because of a mental health condition - up from one-in-three a decade ago - major new report urges reform of sickness benefits

A new report by IPPR, the progressive policy think tank, sets out a plan to reform the sickness benefits system to make it fit for modern health conditions. This comes ahead of the closure of the Department for Work and Pensions' consultation; ‘Work, health and disability: improving lives’ on Friday.

The report finds that:

  • Government efforts to reduce the number of people on sickness benefits have failed; government spending on sickness benefits is spiraling - up by £1.7 billion since 2015 and expected to rise by a further £2.4 billion by the end of the decade. This is because the government has failed to keep people well in work and stem the flow of people falling out of work and onto benefits in the first place;
  • Those with mental health conditions are making up a growing proportion of people on sickness benefits - the proportion increasing from a third to half in the last two decades;
  • Employers spend £9 billion a year for sick pay; the state spends £14.5 billion annually on Employment and Support Allowance alone;
  • The report also finds that many employers are avoiding their responsibility to pay Statutory Sick Pay, thereby denying their employees their rights and costing the state up to £143 million a year.

IPPR is arguing for both employers and government to do more to keep people well at work, to improve employees' health and reduce the cost of sickness for businesses and taxpayers. This would be backed up by tough rules to make sure employers lived up to these new responsibilities. The plan should include:

  • A new ‘Fit Pay’ payment for employees on sickness absence; building on Statutory Sick Pay, this more flexible payment would support employees who develop a health or mental health condition to reduce their hours temporarily, in order to prevent them falling out of work. It could also support those who have fallen out of work gradually to return to work on a part-time basis;
  • Requiring employers to draw up ‘back-to-work plans’ once employees have been off for four weeks. These plans must be agreed with employees, and set out the steps and support necessary to help them back to work. Failure to do this would make employers liable for a further six months of sick pay - with estimated savings to the state of £96 million a year;
  • The government should pilot an expanded ‘Fit for Work’ occupational health service to offer far greater support to smaller employers to maintain employee health and well-being;
  • Tough fines for employers who fail to pay sick pay correctly - the equivalent of a year's Statutory Sick Pay at £4,511.

Joe Dromey, Senior Research Fellow at IPPR, said:

“Governments have talked tough for years about cutting the sickness benefits bill. But they have failed as too little has been done to keep people well in work, and reduce the flow on to sickness benefits.

“More and more people are suffering from mental health conditions in work. But our sick pay system has failed to keep up with these changes.

“So we’re calling for employers and the state to do more to keep people well in work. Our proposal for Fit Pay will do just that, helping employees who develop a health or mental health condition to manage their condition and stay in touch with work.

"And we need to take action against the small minority of employers who are denying sick employees their right to sick pay, and leaving the state to pick up the bill."

Dr Clare Gerada, former chair of the Royal College of GPs said:

“For too long we have seen supporting health and mental health as the responsibility only of hardworking GPs and the wider NHS, ignoring the vital role employers could and should play. We've waited for people to fall ill, and fall out of work, before stepping in. As a result, we've failed to reduce the number of people out of work on health-related benefits.

“As this insightful report highlights, employers need to play their part both in promoting the health and well-being of their workforce, and in supporting people back to work when they fall ill. If the government wants to deliver on its target of reducing the disability employment gap, it should look at these recommendations.”

Seamus Nevin, Head of Employment and Skills Policy at the Institute of Directors said:

“The dignity of a job and the security of a pay cheque should be available to all those who aspire to it.

“Employers have an important responsibility to help look after the physical and mental health of their employees.

“The proposals in this report highlight how changing the incentives and liabilities for employers can be a powerful driver for improving workplace culture and practices. Given the ways employment is changing, it is increasingly important that employers respond to the challenges of wellness in work"

Ends

Contact

Becky Malone 020 7470 6154 r.malone@ippr.org

Editor’s Notes:

  1. The report 'Working well: A plan to reduce long term sickness absence' can be found here.
  2. The research findings in this report were uncovered in the course of research for the New Skills At Work Programme. This programme is supported by JPMorgan Chase to develop new solutions for the workforce challenges of the future. For more information see: www.ippr.org/major-programmes/new-skills-at-work
  3. IPPR aims to influence policy in the present and reinvent progressive politics in the future, and is dedicated to the better country that Britain can be through progressive policy and politics. With nearly 60 staff across four offices throughout the UK, IPPR is Britain’s only national think tank with a truly national presence.

    Our independent research is wide ranging, it covers the economy, work, skills, transport, democracy, the environment, education, energy, migration and healthcare among many other areas. ippr.org