Lord Hunt of Wirral:

Moved by Lord Hunt of Wirral

68: Clause 10, page 37, line 9, leave out paragraph (b) and insert—“(b) in subsection (2), for “four” substitute “two”.”

My Lords, I will speak to Amendments 68, 69, 70 and 71 standing in my name. I will speak to Amendment 68 first. It concerns the removal of the three-day waiting period for statutory sick pay. While we recognise the principle of supporting workers during periods of ill health, we also have to acknowledge the pressures that this places on employers, particularly small businesses which, unlike the state, bear the direct cost of statutory sick pay.

The original waiting period served as a guard-rail, ensuring that statutory sick pay was reserved for genuine and sustained periods of incapacity. Its removal would risk increasing claims for short-term absences, many of which might previously have gone unclaimed or been resolved informally.

The proposal in the Bill to abolish waiting days for statutory sick pay for all workers, including those on temporary contracts and working via employment agencies, introduces an additional cost burden for many small and medium-sized recruitment firms in particular, especially in a period of stagnant growth.

My concern, and that of many of the organisations to which I have spoken across the recruitment and small business sector, is that this change risks creating a perverse incentive, encouraging an increase in sporadic but regular short-term absences, which are notoriously difficult to manage or verify, especially in sectors where workers are supplied for temporary roles at short notice. For recruitment agencies and the employers they serve, such changes impose operational and financial uncertainty. Recruitment firms already operate within narrow margins, absorbing employer liabilities under agency worker regulations. The imposition of statutory sick pay from day one would only add to those pressures without due consideration of enforceability or fraud prevention.

While we recognise the principle of ensuring support for genuinely ill workers, the blanket removal of waiting days ignores the real-world dynamics of flexible and agency working and employment generally. It shifts further costs and risk on to firms that are, in many cases, already struggling with tight cash flows, rising labour costs and post-pandemic recovery.

Amendment 70 reflects our reservations about proceeding too far, too quickly in lowering eligibility thresholds. Where evidence supports a more cautious approach, particularly for new hires and agency workers, as we will come to in the next amendment, we believe that that distinction is warranted.

Amendment 71 seeks to limit the application of Section 155(1), which imposes limitations on entitlement to statutory sick pay to cases where the employee is employed by one or more employment businesses, as defined in Section 13(3) of the Employment Agencies Act 1973. This provision is designed to clarify the specific circumstances under which these limitations will apply.

We must be mindful that agency workers, who often work on temporary short-term assignments, present a unique set of challenges. Employment businesses are intermediaries between the worker and the employer, which means they lack the close working relationship that a traditional employer has with their employees. These businesses are responsible for ensuring the worker receives payment and benefits, but they do not have the same ability to assess the veracity of sickness claims, particularly when workers are placed across different client companies. By limiting the application of Section 155(1) to workers employed by employment businesses, we believe that we are addressing these practical challenges.

In agency work, where a worker’s sickness absence can be difficult to verify, it is essential that limitations on entitlement to statutory sick pay are applied in a way that acknowledges all those complexities. Without this safeguard, we risk creating a situation where employers within the agency sector are exposed to undue costs, which could lead to higher recruitment costs, reduced hiring in the sector and ultimately dampened job creation, a situation that we have to avoid at all costs, especially in the light of the current economic climate.

Amendment 71 would add a new subsection (2A) to Section 155, which would ensure that an employee who holds multiple jobs during a single period of sickness is not entitled to claim more statutory sick pay than they would receive if employed by only one employer. This provision is particularly important in preventing the duplication of statutory sick pay claims, where an individual could potentially claim statutory sick pay from multiple employers at once, leading to a higher total amount than they would have been entitled to had they been employed by only one. This could become a serious problem as workers increasingly hold multiple part-time or temporary jobs to supplement their income. While this reflects the changing nature of modern work, which we discussed earlier today, it also opens the door for potential overpayment of statutory sick pay benefits—a situation that could be exploited.

The purpose of statutory sick pay is to provide a temporary financial safety net for workers when they are unable to work due to illness and not to allow workers to accumulate more benefits than they would have earned had they been able to work. This amendment seeks to close that loophole by ensuring that no employee can claim more than the maximum entitlement they would receive from a single employer during a period of illness. Our aim is not to deny sick workers their rightful support but to ensure that they do not receive excessive benefits by claiming across multiple jobs. I beg to move.

My Lords, the minute hand of legislation is approaching the blessed relief of adjournment, so I am going to reserve what I have to say about statutory sick pay to when I speak to Amendments 73 and 74 in the next group, in which I think some issues of the costs are addressed. I know the noble Baroness, Lady Coffey, and I have come up with amendments that are broadly similar, and I think it would be more appropriate to speak there.

My Lords, I am pleased that we have moved on and that we are now debating the Bill’s important provisions to improve the provision of statutory sick pay for millions of people across the country. I therefore thank the noble Lords, Lord Sharpe and Lord Hunt, for tabling Amendments 68, 69, 70 and 71 on this topic and speaking to them. These amendments would significantly change the statutory sick pay measures in the Bill.

The pandemic exposed just how precarious work and life are for those on low incomes, with many forced to choose between their health and financial hardship. Strengthening statutory sick pay is part of the Government’s manifesto commitment to implement our plan to make work pay, ensuring that the statutory net of sick pay is available to those who need it most. These changes are important. Estimates indicate that up to 33% of influenza-like illnesses are acquired in the workplace. One sick employee coming into work can lead to 12% of the workforce becoming sick, according to WPI Economics’ modelling.

The changes to remove the waiting period and lower earnings limit from the SSP system will therefore benefit employers by reducing presenteeism, which in turn can lead to overall productivity increases and can contribute to a positive work culture that better helps recruit and retain staff. This can help to reduce the overall rate and cost of sickness absence to businesses, and also contribute to reducing the flow of employees into economic inactivity.

I will turn first to Amendments 68 and 70. Removing the waiting period is essential to ensure that all eligible employees can take the time off work they need to recover from being sick, regardless of whether they are an agency worker. Removing the waiting period will also better enable phased returns to work, which evidence shows can be an effective tool in supporting people with long-term health conditions to return to and stay in work. This change should help to reduce the overall rate and cost of sickness absence to businesses, contributing to reducing the flow of employees into economic inactivity.

I regret that the noble Lord’s Amendment would make this more challenging, as it would mean that employees would have to take two consecutive days off to be eligible for statutory sick pay. I do, however, understand the noble Lord’s concerns about the impact of the waiting period removal on businesses, but if employers have the right policies and practices in place—and most good employers do—the risks of inappropriate absenteeism can, of course, be mitigated. Crucially, the additional cost to business of the SSP reforms is around a relatively modest £15 per employee. We have been lobbied from both directions on these provisions because, for example, many on our own Benches would say that the rates we are proposing here should be much higher. I am sure they will make their concerns heard at some point during the passage of the Bill. It is not a great deal of money—as I say, it is £15 per employee—and it is certainly aimed at the lower rate that could be available.

On Amendment 69 regarding agency workers, one of the fundamental principles of the Bill is to ensure that people who work through employment agencies and employment businesses have comparable rights and protections to their counterparts who are directly employed. Amendments that limit the entitlement of agency workers would undermine this objective and have no reasonable justification. The noble Lord, Lord Hunt, said that employment agencies have more of an arm’s-length arrangement with their agency workers, but I would say the opposite: in fact, employment agencies are in a powerful relationship over their agency workers, meaning that those workers are less likely to abuse such a scheme.

Amendment 71 seeks to limit the maximum entitlement of SSP for employees with multiple employers so that they would receive no more statutory sick pay than they would be entitled to if they worked for only one employer. However, this would be administratively very complicated to deliver for businesses, particularly SMEs, and carries a high risk of SSP being miscalculated and employees being underpaid. It would particularly harm the very lowest-paid people who are working a limited number of hours. I also question the necessity of such an amendment. As it stands, employees with more than one job can already receive SSP from their employers if they earn above the lower earnings limit. The measures in the Bill will not change that, and I regret that this amendment would impact only the lowest-paid employees.

That is all I have to say on this issue at this stage, and I therefore ask the noble Lord to withdraw his amendment on the basis of the assurance I have given.

My Lords, I recognise that the Minister says that she understands the concern that has been expressed. We are aware too that many agencies have raised with the Government the serious impact on small businesses and the risk of increased absenteeism. I believe their concerns are valid and I hope the Minister will continue to keep an open door for those agencies to perhaps respond in more detail directly to the Minister.

I will leave the Minister with some critical questions. First, do the Government recognise the potential loophole created by the removal of waiting days for statutory sick pay, where workers could begin to take sporadic short-term sick leave, making it so much harder for employers to manage and verify? Secondly, do the Government justify the increased cost burden on recruitment agencies, particularly small and medium-sized enterprises, at a time when they are already struggling with rising costs and stagnant growth? Thirdly, will the Government consider the practical implications of multiple statutory sick pay claims by workers with several employers, enabling them to double-dip and receive more than the maximum entitlement? Fourthly, why have the Government chosen to ignore the heartfelt and well-informed warnings from the recruitment sector about the risk of unsustainable financial pressure on businesses, which are already providing much-needed jobs in a challenging economy?

I believe these are not small matters. The Government’s decision currently risks undermining the integrity of the statutory sick pay system and could have serious consequences for businesses, workers and the economy. I hope the Minister will reconsider but, in the meantime, I beg leave to withdraw the Amendment.

Before the noble Lord sits down, it would be very helpful if he could confirm and clarify that, in expressing a concern that removing the waiting days would lead to more and sporadic absenteeism, it is not being implied that workers are swinging the lead. If it was being implied, where is the evidence?

Of course it is not being implied. It is outrageous that the noble Baroness should think so and voice so in this debate, which has seen a very calm and careful consideration by the Minister, who sets a good example for us all. I hope the noble Baroness will follow it. I beg leave to withdraw.

Amendment 68 withdrawn.

Amendments 69 to 71 not moved.

Clause 10 agreed.

House resumed.

House adjourned at 6.48 pm