The government has announced that the new Health and Work Service will be paid for by scrapping the Statutory Sick Pay Percentage Threshold Scheme. This news makes it more important than ever for employers to protect themselves against the unpredictable costs of sickness absence. And protection is available in the market, although most employers may not be aware of it.

The Health and Work Service will be introduced this year to help prevent long-term sickness absence. It will offer free advice for those who have been off work for over four weeks, as well as non-compulsory medical assessments and treatment plans. But whilst this is certainly a step in the right direction, the decision to fund the service by cutting important support for employers with high levels of absence is a concerning one.

Previously, the Percentage Threshold Scheme would offer compensation to employers that experienced high levels of sickness absence at the same time, allowing them to recover some or all of the Statutory Sick Pay they incur. However, under the new rules this compensation scheme will be scrapped, leaving employers to bear the full cost if they experience high levels of sickness absence.

This change could represent a major additional cost for employers. With 1 in 10 people unable to work for 6 months or more due to illness during their working lives, and many more off sick for shorter periods of time, sickness absence is an issue that will affect all businesses. Whilst the Health and Work Service aims to help employees back into work and reduce absence in the long-term, employers will still be left with the immediate financial burden of paying Statutory Sick Pay.

The problem is even more acute for smaller businesses which are most vulnerable to financial pressures. A smaller company that feels the pinch if just one sizeable invoice is paid late, will find it very difficult to deal with large unexpected costs like the cost of paying out Statutory Sick Pay if employees fall ill. This week, accountancy firm Baker Tilly went as far as to say the impact on small businesses could be catastrophic and lead to closures.

With the removal of the Percentage Threshold Scheme just around the corner on 6th April, now is the time for employers to make sure they are protected against the unpredictable costs of sickness absence. Doing so will protect both businesses and employees, and make sure no one is caught out once the changes come into force.

By Peter O’Donnell, CEO, Unum