Partner Article

Micro-employers lose SSP funding

From 6 April, small businesses are to lose the right to reclaim statutory sick pay (SSP) that they pay out by deducting it from their monthly NI payments.

For some of the smallest, this will be catastrophic and may lead to closure.

SSP can be a huge burden on small businesses – they must pay an absent worker £86.70pw in SSP, and pay a replacement worker to cover the absence. Once the SSP exceeds 13% of the total NI bill for the period, they can recover it under the current rules called the PTS (Percentage Threshold Scheme).

This was designed as disaster relief for small employers who can’t afford to bear the SSP cost when too many workers are off sick.

From 6 April, they’ll have to pay the replacement worker’s wages and the SSP with no right of recovery, as the PTS is being abolished.

SSP next year will be £87.55pw, so if one employee is absent for a long period, the SSP bill will be a maximum of £2,450 for 28 weeks or more of absence. This is a huge amount for a small business to bear and will make some such businesses uneconomic. An employee diagnosed with cancer that involves extended chemotherapy could result in the business going under.

Back in the early 1980s, SSP was invented as a replacement for state sickness benefit paid by the DHSS. Employers were to pay it through payroll and recover the cost from other NI contributions due in the same month.

As a tax-raising measure, in 1991, the recovery was capped at 80%, and in 1995 it was abolished, except for small employers whose SSP cost was above the 13% threshold that has applied since.

Employers will do well to find the change mentioned on the HMRC website, and ‘SSP’ doesn’t appear when searching the DWP website on GOV.UK.

The change was announced in early 2013, but there has been little or no publicity. The official reason for the change is that SSP recovery does not incentivise employers to get their workers back to work, so the PTS is being abolished to fund a new Health & Work Service, an occupational health service for small business to which any worker off sick for four weeks must be referred. A helpline or referral will not help the typical employee with a life-threatening condition back to work.

This was posted in Bdaily's Members' News section by Baker Tilly .