In sickness and in health: Why Statutory Sick Pay needs further reform

Executive summary

If you can take time off work when you’re ill without losing some of your pay, count yourself lucky - only about half of all employees are paid their full wages when they’re too ill to work. A significant share - up to 1 in 4 - have to rely on Statutory Sick Pay (SSP) only.

At just £116.75 per week, SSP is one of the least generous sick pay rates by international standards. Someone working full-time on the minimum wage would lose more than 70% of their earnings if they had to live on SSP. Additionally, SSP isn’t paid until the fourth day of illness, and anyone earning below the lower earnings limit of £123 per week is not entitled to any SSP at all.

SSP is the single largest employment issue that people come to Citizens Advice for help with. In 2023/24, we helped nearly 50 people per day with an issue related to SSP. One of the biggest issues these clients face is financial hardship. Of the people we helped with SSP in 2023/24, 1 in 5 (20%) needed access to charitable support, including more than 1 in 10 (12%) who needed access to a foodbank. 

The government has acknowledged that SSP needs to be reformed and has decided to remove the 3 unpaid waiting days and the lower earnings limit. These changes are welcome, and our analysis shows they will make a difference. However, we can also see that to truly protect people against financial hardship during illness and injury, the SSP rate needs to be increased.

Using the National Red Index - a combination of detailed budget data from the people we help with debt issues and national survey data - we model what percentage of working people in the bottom 3 income deciles in England, Scotland and Wales would see their household pushed into a negative budget for the duration of their illness if they had to spend up to 4 weeks on SSP. A negative budget is when a person’s income is not enough to cover their essential costs, even after they’ve been helped by a professional debt adviser to set a minimum sustainable budget. We compare the government’s reforms with the current SSP entitlement, as well as 4 potential higher rates. 

From our analysis it’s clear that the current SSP rate is not sufficient to protect people against financial hardship during periods of illness. If working people in the bottom 3 income deciles had to rely on the current SSP entitlement for just 1 week, we would see the share of households in a negative budget increase by 16%. After 4 weeks, the share in a negative budget would increase by 67%, to a total of 81%. That’s the equivalent of 1.7 million households who are at risk of being unable to afford their essential costs when they're sick.

The government’s reforms - removing the 3 unpaid waiting days and the lower earnings limit - would reduce the share of households pushed into a negative budget after 1 week of SSP by 5%. However, after 4 weeks of SSP, the share protected from a negative budget would fall to just 4%. The total share in a negative budget would still be 78% - the equivalent of 1.6 million households.

If, in addition to the government’s planned reforms, the rate were increased by just £67 per week - to the same level as Statutory Maternity Pay - double the number of households would be protected from a negative budget after 1 week of SSP, and 5 times as many after 4 weeks. 

This is still a low rate, and would replace less than 46% of earnings for someone working full-time on the minimum wage. The government should be aiming for a higher rate - a percentage of the National Living Wage, or a percentage of earnings - that would at a minimum allow people to meet their essential costs.

In addition to reforming the rate, we call for the government to ensure that the new Fair Work Agency is designed so that it can effectively enforce rights like SSP. We currently see far too many cases of people being denied SSP, wrongly told they don’t qualify for it, or being dismissed when they ask for it. This kind of non-compliance is likely to increase as SSP is strengthened.

What we’re seeing on the ground

SSP is the single largest employment issue that people come to us for help with. In 2023/24, we helped nearly 50 people per day with an issue related to SSP.

One of the most common issues we help these clients with is financial hardship. The unpaid waiting days, lack of entitlement to SSP, and the low rate mean that taking even a few days of sick leave can cause a big drop in earnings - one that many simply can’t afford. As a result, people are falling behind on their rent and bills, being pushed into debt, and having to choose between heating and eating. This affects not just individuals, but their entire households, including their children. Some people return to work before they’ve fully recovered, or simply work through injury and illness, with documented public health ripple effects.

Of the people we helped with SSP in 2023/24, 1 in 5 (20%) needed access to charitable support, including more than 1 in 10 (12%) who needed access to a foodbank.

Martin* is on sick leave due to having broken several bones in his hand. His job involves driving a large vehicle, which he can’t do due to his injury. He needs 5 to 6 weeks to recover fully, and during that time he’s only paid Statutory Sick Pay. It’s not enough to cover his rent and bills let alone other essentials. He’s had to come to us for 3 foodbank vouchers since going on sick leave, as he can’t afford to buy food. Martin tried to go back to work early as he was desperate for more income, but had to sign off again because his hand wasn’t fully healed. It doesn’t make sense for him to apply for Universal Credit - he expects to be back at work before he’d even receive the first payment. 

*All the case studies in this report are from real people who have come to Citizens Advice for help. Names have been changed to protect anonymity.

You might expect the benefits system to step in when someone’s income drops due to illness, but unfortunately it’s not responsive enough. Anyone claiming Universal Credit (UC) for the first time has to wait 5 weeks before receiving their initial payment, and those already receiving UC have to wait at least a month before their payment adjusts to reflect their lower earnings. Like in Margaret’s case below, the hardship caused can be significant. There are also many people in the labour market who are excluded from receiving benefits.

“I’ve been diagnosed with cancer and am about to receive 9 months worth of treatment. I am on Statutory Sick Pay, and will need to be for at least 4 months. This will probably increase to 6 or 7 months, as advised by my cancer nurses. My wages for this month have gone from £2,000 to £1,000, and next month they will be less than £500. My Universal Credit has not caught up with my drop in wages, so I don’t have enough money to cover my rent this month, let alone my bills. It’ll be 3 months before I receive additional disability payments, leaving me with very little to live on. I already have debt from council tax, gas and water, and it’s causing me a lot of anxiety. Now that I’m unable to work due to my cancer diagnosis, I have no way of repaying these debts.”

The government’s reforms are welcome, but increasing the rate would make a bigger difference 

The government’s plans for reforming SSP - by removing the lower earnings limit and the 3 unpaid waiting days - are important and welcome, but our data shows that it’s reforming the rate that would make a real difference.

Using the National Red Index - a combination of detailed budget data from the people we help with debt issues and national survey data - we’ve modelled what percentage of working people would see their household pushed into a negative budget for the duration of their illness if they had to spend up to 4 weeks on SSP. [1] [2]

A negative budget is when a person’s income isn’t enough to cover their essential costs, even after they’ve been helped by a professional debt adviser to set a minimum sustainable budget. Being in a negative budget means either falling behind on your bills, cutting back on essentials like food and heating, eating through your savings, or taking on debt. The most common causes of sickness absences are minor illnesses - accounting for 30% of occurrences - and on average only 5.7 working days are lost to illness per worker per year. But even short-term acute income shocks can have serious consequences as a result of payments missed, debt accumulated, and distress caused. For those experiencing long-term illness, like cancer, the income shock will be larger and longer-lasting. 

Our analysis compares the government’s reforms with the current SSP entitlement, as well as 4 proposed higher rates. We’ve done this for working people in the bottom 3 income deciles of the labour market in England, Scotland and Wales, to reflect the fact that people on lower incomes are much more likely to rely on SSP compared to those on higher incomes.

Comparing the government’s reforms to the current SSP entitlement

From the analysis it’s clear that having to rely on SSP is often disastrous for people’s finances. On the current entitlement, the share of households in the bottom 3 income deciles who are in a negative budget would increase by 16% after just 1 week of SSP. After 4 weeks, the share in a negative budget would increase by 67%, to a total of 81%. This is the equivalent of 1.7 million households who are at risk of being unable to afford their essential costs when they're sick.

The numbers are worse for those working full-time, defined here as more than 35 hours per week. After 4 weeks of relying on SSP, the share of full-time workers in the bottom 3 income deciles whose household would be in a negative budget would increase by 91%, to a total of 97%. This is compared to a 46% increase for part-time workers, to a total of 69%. The difference is due in part to SSP being a flat rate - the more you earn, the less of your income is replaced. Part-time workers are also more likely to have income from other sources, such as benefits. 

These numbers point to a clear need to reform SSP. As the system stands, for far too many people relying on SSP, being sick means being unable to afford essential costs like rent, food and bills. This is why the government’s plan to remove the 3 unpaid waiting days and the lower earnings limit are so welcome. 

Our analysis shows that these reforms would reduce the share of people whose household would be pushed into a negative budget after 1 week of SSP by 5% on average and for full-time workers, and by 4% for part-time workers. 

However, the longer people have to rely on SSP, the less they are protected by these reforms. After 4 weeks of SSP, the share protected from a negative budget drops to just 4% on average (2% for full-time workers), with a total of 78% pushed into a negative budget - the equivalent of 1.6 million households. Only part-time workers remain better off, with 5% fewer households pushed into a negative budget. This is largely thanks to the removal of the lower earnings limit, which only affects part-time workers. 

The rate will need to be raised if SSP is to offer meaningful protection

To offer any lasting protection, it’s clear that the amount of SSP people get has to go up. Increasing the rate by just £67 per week - to the same level as Statutory Maternity Pay - would protect double the number of households from a negative budget after 1 week of SSP, and 5 times as many after 4 weeks. This rate is still low, and would replace less than 46% of earnings for someone working full-time on the minimum wage. For someone with average UK earnings, the replacement rate would only be 28% compared to an average of 68% across those OECD countries that have a country-wide system of mandatory sick pay. The government should be aiming for a higher rate - a percentage of the National Living Wage, or a percentage of earnings - that would at a minimum allow people to meet their essential costs.

We can also see the impact of SSP on the amount of money people have left over at the end of the month, after essential costs. While, on average, working households in the bottom 3 income deciles have about £500 left over each month after essentials, this changes rapidly if one working household member’s wages are replaced by SSP. 

On the current SSP entitlement, it takes just two weeks for working households to have, on average, a budget deficit. After 4 weeks, they’re deep in the red with a deficit of more than -£500. The government’s reforms do make a difference, but only a relatively modest one. After 4 weeks on the reformed SSP entitlement, people are still left with a monthly deficit of -£438 after paying for essential costs.

What this tells us is that if people with low incomes have to rely on SSP for more than 2 weeks, they’re likely to start accumulating debt just from essential costs. A higher SSP rate would help protect against this. 

Predictably, increasing the SSP rate will come with some trade offs. There will be a direct cost to businesses, and smaller employers may need relief through a rebate scheme - like the one that was in place during the pandemic. This then carries a cost to the exchequer. 

But these costs are already there, they’re just accounted for differently. Instead of being carried collectively, they’re borne by individual workers, usually those from the lowest income deciles and at the more vulnerable end of the labour market. This erodes the financial resilience of those who are often already struggling. Some of their costs are then passed indirectly to the exchequer, through increased need for benefits, higher reliance on crisis support like food banks, and lower social wellbeing. 

With the Employment Bill passing through Parliament, there’s an opportunity to rebalance this equation. Truly reforming SSP - by increasing the rate as well as removing the lower earning limit and the 3 unpaid waiting days - would support people who are going out to work and ensure they’re protected against financial hardship when they’re ill or injured. 

Reforms are needed, but so is enforcement

It’s crucial that the SSP rate is increased, but we also need to ensure people can actually access SSP when they need it. We currently see far too many cases of people being denied SSP, wrongly told they don’t qualify for it, or being dismissed by employers who don’t want to pay SSP. This kind of non-compliance is likely to increase as SSP is strengthened.

Maisie contacted us for a foodbank voucher as she and her daughter didn’t have enough food to last them the weekend. She’s in debt and can’t afford to top up her energy meter. During the advice session we found out that Maisie is on sick leave from work and isn’t being paid. Her contract says she isn’t entitled to sick pay. Maisie didn’t know that sick pay is a statutory right and that she’s entitled to it. We’re now helping her access the sick pay she’s owed.

To tackle non-compliance, state enforcement of employment rights needs to be strengthened. The Fair Work Agency (FWA) is a good opportunity for this, but only if it’s designed to deliver for those workers most likely to experience issues with accessing SSP. In our recent report, we’ve set out what’s needed.

First, the FWA will need to enforce workplace rights proactively rather than expecting workers like Stefan, who may be afraid of retaliation, to report non-compliance.

Stefan sustained a serious injury while working as a baker on a zero-hours contract, and had to take time off from his job. Despite it being a workplace injury, and despite having a sick note from his GP, Stefan received no sick pay. When he asked if he could get holiday pay instead, he was dismissed. Stefan doesn’t speak English and isn’t receiving benefits. When he came to us, he’d had no income for nearly 2 months. Despite what he’d been through, Stefan was adamant he didn’t want to take action against his employer. He’s scared it could affect his future employment prospects.

To do this effectively, the FWA will need on the ground intelligence. Frontline organisations should have a formal role in supplying this intelligence, as well as providing workers with information, advice, and support in accessing the FWA. This would help produce a reliable picture of what’s happening on the ground, create an accessible ‘front door’ to the FWA, and potentially save resources by resolving issues informally, as in Helen’s case.

Helen has breast cancer and is undergoing treatment (surgery and radiotherapy). She’s been told she’ll need 3 months off work. Her employer - a large leisure service provider - said she can’t get Statutory Sick Pay because she’s 'on a flexible contract'. On our advice, Helen challenged this and her employer eventually admitted she does have the right to receive sick pay.

Second, the FWA should have the ability to determine whether employers are using the correct employment status. We see far too many cases like Ruth’s, where people are wrongly told they’re self-employed to avoid statutory duties. Currently the only way to challenge this is through an Employment Tribunal, a complex and potentially costly process which, due to delays, could take several years.

Ruth has managed her employer’s fruit farm for 9 years, working 14-hour days. Her boss insists she’s self-employed. She’s paid a fixed amount with no holiday or sick pay. Her work includes heavy lifting, which has led to several hernias that require surgery. Ruth can’t work while she waits for her operation, and will need several months to recover. Her boss has stopped paying her any earnings. She has no private pension and her state pension only just covers her rent.

Third, the FWA must ensure that people who are made vulnerable by their immigration status, like Diana, are able to seek help. Proactive enforcement is important for this, but so is ensuring people don’t face immigration consequences for reporting poor treatment at work.

Diana is a care worker. She hasn’t received the Statutory Sick Pay she’s entitled to, nor her full wages. She’s on a sponsored work visa, which makes it difficult for her to assert her rights at work. If her employer refuses to co-operate and she takes things further, they could dismiss her. If Diana loses her job, she’s likely to struggle financially - she has no recourse to public funds, so can’t access Universal Credit or most other benefits. She could also lose her visa if she can’t find a new employer to sponsor her. Our adviser told Diana what her rights are, but there’s little Diana can do without risking her livelihood and her right to stay in the UK.

Finally, no agency can be effective unless it has the funding and resources needed to carry out its work. Sufficient and independent funding - for example through a levy on large businesses - will be the real test of the government’s commitment to enforcing rights at work. 

A true test for success

The Employment Bill, which is currently making its way through Parliament, includes several changes that we expect will be positive for Citizens Advice clients. Chief among them are the reform of SSP and the creation of the FWA. But the extent to which these changes actually deliver for working people, especially those who are at the sharpest end of the labour market, will be the real test of whether the government is making a difference. 

Looking at SSP through the lens of negative budgets, as this report does, provides an objective measure of success. Whether or not people can afford their essential costs is the ultimate red line under which no one should be allowed to fall. We have to ensure that government policies aren’t pushing people below it.

It’s therefore crucial that not only are the government’s proposed reforms to SSP implemented, but that the actual amount of SSP that people receive is also increased. Otherwise we will continue to see people driven into hardship and debt when they get sick, or working through injury and illness when they should be resting and recovering.

Endnotes

[1] We have modelled time spent on SSP by week rather than by day because this is a fixed rate, while the daily SSP amount varies depending on the number of days worked per week. I.e., someone working 3 days per week could receive up to £39 of SSP per day worked, while someone working 5 days per week would only receive up to £23 per day worked. Their weekly SSP amount would be the same.

[2] We have modelled the impact of relying on SSP for up to 4 weeks because negative budgets are calculated based on monthly income and expenditure, and there are only 4 full weeks in a month. This means that for those experiencing long-term illness of more than 4 weeks, the negative budget rate would likely be worse than what we have modelled. This is due to there being up to 3 additional days of reduced income in a month compared to a 4-week period. Additionally, after a month, people receiving Universal Credit would potentially see their benefits payment increase to reflect their drop in income from wages.