The Proposed Sick Leave Bill 2021
New Rights Without Responsibilities Could Create a Charter for Absence?
Introduction
On 09 June 2021, the Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar TD, announced details of a new law to give all workers the right to paid sick leave. The Government hopes to have the Bill enacted by year end. However, without sufficient checks and balances, there is a risk that a new entitlement to statutory sick pay (SSP) could become a ‘charter for absence’.
The Government’s statutory sick pay scheme is to be phased in over a four-year period, starting with three days per year in 2022, rising to five days in 2023 and seven days in 2024. Employers will eventually have to cover the cost of 10 sick days per calendar year in 2025.
According to the Department “It’s being phased in to help employers, particularly small businesses, to plan ahead and manage the additional cost, which has been capped… The scheme is designed to be fair and affordable with the minimum complexity and administrative burden for employers.”
Those advocates for a statutory sick leave scheme argue that in many European states, some or all employers are required by law to make provision for sick leave. In Ireland there are no laws mandating sick leave other than where employers offer it voluntarily or under a collective bargaining agreement. Each employer can decide its own policy on sick leave, but it must provide its employees with written information about its sick leave policy.
Proponents argue that for many workers, particularly those in unorganised or precarious employment, they are at risk of suffering financially or even of losing their job – if they become sick.
Benefits
While the Department acknowledges that SSP will impose costs to the employers, particularly to those who do not provide occupational sick pay, it argues that it is also beneficial to them including:
1. Reducing presenteeism.
2. Management control over absenteeism.
3. Reduced employee turnover.
4. Safer work environment.
5. Reduced spread of infectious diseases.
Key Sick Pay Provisions – What you need to know?
The Bill is to stipulate that sick pay will be paid by employers at a replacement rate of 70% of an employee’s wage, subject to a daily threshold of €110. The daily earnings threshold of €110 is based on 2019 mean weekly earnings of €786.33 and equates to an annual salary of €40,889.16. (It can be revised over time by ministerial order in line with inflation and changing incomes.)
The rate of 70% and the daily cap is intended to ensure excessive costs are not placed solely on employers, who in certain sectors may also have to deal with the cost of replacing staff who are out sick at short notice. The daily earnings threshold cut-off point is also to ensure that employers do not face excessive costs in relation to employees who are on high salaries.
The scheme is intended to provide a level of sick pay coverage to those employees, often in low paid roles, who may have no entitlement to company sick pay schemes that currently receive no sick pay/or are not entitled to illness benefit.
This is equivalent to a 2.6% pay increase in terms of value to the average employee who currently receives no sick pay from their employer.
Other features of the scheme are that an employee will have to obtain a medical certificate to avail of statutory sick pay, and the entitlement is subject to the employee having worked for their employer for a minimum of six months.
Once entitlement to sick pay from their employer ends, employees who need to take more time off may qualify for illness benefit from the Department of Social Protection subject to PRSI contributions.
The move to statutory sick pay will not prevent employers offering better terms or unions negotiating for more through a collective agreement. The scheme is intended to offer a floor level of protection, and legislation will not interfere with existing, more favourable, sick pay schemes that are in place.
There is no waiting period envisaged under the scheme, so employees are to be entitled to sick pay from the first day of illness or injury, which may be especially challenging for SME’s, many of whom operate on low margins and are already trying to manage the twin impacts of COVID-19 and Brexit.
The specifics of any dispute mechanisms remain unclear or what penalties shall be prescribed for noncompliance. It is intended that the scheme shall be legally enforceable through the Workplace Relations Commission and the Courts. SSP will become an employment right and all employers will have a statutory obligation to pay their employees who are absent from work due to illness, certified by a medical doctor as unfit to attend work.
Key Issues Arising
1. The Scheme envisages payment of sick pay from Day 1 without any obligations on an employee when in most cases where sick pay schemes are provided on a voluntary basis by employers or within collective agreements, payment is only provided after the first three days.
2. Domestically, there are a number of schemes in place in sectors covered by ERO’s/ SEO’s in sectors such as contract cleaning, security, and in construction that have been negotiated by Employers and Trade Unions over many decades. These contain important elements of scheme design which are notably absent from the proposed scheme including, no payment for the first three days of any absence.
3. Helpfully, the scheme will require that an employee must obtain a medical certificate to avail of statutory sick pay. The requirement for a medical certificate applies to each such day of absence. The scheme appears to be silent on the need for clear notification provisions by the employee to the employer which must be an essential element of scheme design. It also fails to take account of the practicality of securing such certification and the burden on the GP system and the challenge for workers in securing GP appointments at very short notice.
4. It stipulates that an employee must have a minimum of 6 months service to qualify and does not allow for any other differentiation of entitlement to be based on service or to permit an employer to decline payment where a person already has excessive absence. The number of SSP days an employee will be entitled to is cumulative in a calendar year. It is noted that the entitlement is to be on a calendar year basis, whereas it should apply on a ‘rolling year’ basis.
5. It is unclear if there is to be discretion available to an employer on applying the SSP based on the employee’s previous absence history and takes no account of the origins of the nature of the absence e.g., due to work-related injury, car accident, high risk pursuits etc. Most sick pay arrangements allow for the specification of a range of exclusions from benefit cover.
6. Based on the Regulatory Impact Analysis of the Scheme for the Bill, the costs for employers ranges from €525.50 to €1,100.40 per employee per annum across salary distribution points apart from any administrative costs and labour market impacts.
7. As part of the additional administrative costs envisaged, the Department in its Regulatory Impact Assessment acknowledges that these will include ensuring that the new system is clearly understood by employees, governing the notification of sickness, determining the entitlement for the employee (eligibility, linked spells), and keeping records for tax purposes.
8. The scheme is to fill the gap in coverage caused by Illness Benefit waiting days (currently 3 days). It should facilitate a smooth transition to state supported Illness Benefit if the worker applies for it on day four. The Department argues that closing the gap of current waiting days before being able to access Illness Benefit will minimise the numbers of sick employees presenting for work.
9. The obligation rests with the employer to pay. There is no reimbursement by the Government to the employer and there will be no top up of salary from the State. The employer will deduct taxes in the normal manner.
10. The scheme is a permanent move to statutory sick pay, and it will impose replacement costs on businesses, particularly SME’s where they have to pay people who are absent for short periods and also those that are rostered in to replace them.
11. It takes no account of an Employer’s ability to pay sick pay. There is a need to recognise that for some SME’s despite the cap on payment levels and the phased introduction by 2025, they may struggle or be unable to fund such payments. Ultimately the scheme passes the full responsibility and payment liability from the State to the Employer.
Assessment
1. Whilst recognising the significant strain which Covid-19 has placed on workers, employers and all citizens, the introduction of universal SSP will have most impact on SME’s. Whilst about 50% of employers who operate voluntary sick pay provisions give full pay, the Bill will create significant additional costs for SME’s, notwithstanding the rate of 70% and the daily cap applicable. Many SME’s are continuing to face real challenges as the economy reopens with many in vulnerable sectors, and who are impacted by Brexit.
2. We know that national coverage of sick-pay schemes for the private sector workforce is between 50% and 60%. The introduction of SSP will involve a major change in employment law, placing the issue firmly in the employment rights arena and will cause all employers to reassess their sick pay policies. It will lead to some employers reducing their current sick pay scheme benefits where these are being paid and consideration of further cost cutting measures to cover any additional cost, giving rise to potentially difficult employee relations issues.
3. The additional costs for employers arising from the Bill will be compounded by their having to pay an employee sick pay and by having to pay the replacement costs of temporary cover of that person and where this could happen at short notice, or even without notice. Up to now, an employer has the choice of paying replacement staff for the duration of a person’s illness or cope with revenue or productivity loss due to that person being absent.
4. Elements of the proposed scheme is at odds with provisions applicable in respect of the extent and operation of ‘statutory sick pay provisions’(SSP) in the UK and Northern Ireland. By way of example, those provisions allow for employers to reclaim amounts of SSP and stipulates a range of qualification and disqualification conditions for any benefit to apply.
5. There is a high risk that, unless the scheme has clear rules and recognises the need for management to exercise prudent decision making and discretion in the application of SSP, it could have a negative effect or impact on absence levels. Clarity on applicable arrangements governing the notification of sickness, determining the entitlement for the employee (eligibility, linked spells) and capacity to suspend entitlements where there is a poor attendance record are essential elements which must be allowed for. These are normal rules that must also be applicable to SSP.
6. The introduction of SSP, in the manner proposed, will impact on the terms of existing collective agreements (CA’s), which cover occupational sick pay and employers will be concerned that if normal rules applicable to sick pay provision are not captured under SSP, it will lead to claims for improvements in the terms of existing CA’s and / or the removal of well-established rules.
7. Whilst the phased approach to 2025 is welcome, in finalising the scheme, it would be beneficial to workers and employers if a set of standard rules for the operation of SSP was provided for that would apply in the absence of an agreed alternative at enterprise level. A similar approach was adopted on the introduction of information and consultation rights under the Employees (Provision of Information and Consultation) Act, 2006.
Conclusion
Whilst the publication of the scheme for the Bill provides a line of sight on critical elements, the scheme, though well intentioned to address the needs of workers during the Covid-19 pandemic, will place additional burdens on employers at a time of peak uncertainty. For SME’s, their survival and recovery from Covid-19, as part of the national recovery effort, remains uncertain and many are still trying to navigate the effects of Brexit.
As the Government has decided to proceed with a SSP scheme it is critical that it strikes the right balance. Consideration of increasing employers’ cost in relation to sick pay will inevitably lead to employers reducing employment costs in other ways, as they are not able to absorb these costs on employment or to increase prices of goods or services provided.
There needs to be a proper debate on the need for integrated structures and support for those out of work due to illness to get back to work, and to examine how the level and costs of absenteeism can be reduced generally. Irish business remains highly sensitive to increases in employment costs. We need to help employers to reduce these costs, so that through the economic recovery, now underway, can sustain and create jobs so that we can hasten the return to much needed investment and growth.
This must be our concerted focus in addition to ensuring that any system of SSP is fair, equitable and workable at the level of the enterprise. Solutions to the issues raised above will need to be found in the coming months.
If you would like to talk to us about any of the above issues, please get in touch with me at brendan.mcginty@stratis.ie or any one of our Partners.
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Brendan McGinty
Managing Partner
Stratis Consulting
‘Leading People Strategies’
T: +353 (0) 1 2166302
M: +353 (0) 87 2433038
W: www.stratis.ie Twitter: @Stratisconsult LinkedIn: Follow us here
Disclaimer: The information in this article is for practical guidance only and does not constitute legal or specific case advice. The answers to specific situations will vary depending on the circumstances of each case. This is not a substitute for specific professional advice relevant to individual circumstances facing your business.
