​Unions Push for Day-One Sick Pay Reform: Can Businesses Keep Up?

The government faces increasing pressure from trade unions to enhance Statutory Sick Pay (SSP), raising questions about the economic implications of such reforms. At the heart of the debate is whether businesses can afford the proposed changes and how they may affect the broader economy.

Unions, led by organisations such as the PCS and the Royal College of Nursing, are pushing for SSP to be paid at a higher rate from the first day of illness. Currently, SSP is £118.75 per week, set to increase by just £2 in April 2025. This is significantly lower than the usual income for many workers, leaving them financially vulnerable during illness.

While unions argue that inadequate SSP forces employees to choose between their health and finances, businesses warn that such reforms could create significant financial and operational challenges.

Proposals to raise SSP and eliminate waiting periods are expected to hit businesses hard, as well astiny and medium-sized enterprises (SMEs). With workers eligible for SSP from the first day of absence, employers could see their sick pay liabilities double. The Federation of Small Businesses (FSB) has expressed concern, arguing that these reforms may disproportionately impact smaller firms, especially those employing older or younger workers who typically take more sick days.

Business leaders have also raised concerns about a potential rise in absenteeism. Higher sick pay and immediate eligibility might incentivise employees to take more days off, affecting productivity. While unions argue that adequate sick pay reduces presenteeism and benefits long-term productivity, businesses fear these measures could disrupt operations and increase costs.

The cumulative cost of SSP reforms is estimated to run into billions annually, with potential knock-on effects for the economy. Critics warn that businesses may respond by reducing hiring, limiting wage growth, or cutting investment. Tina McKenzie, Policy Chair at the FSB, cautioned that these changes could act as a “brake on job creation” and stifle economic growth when the government is focused on increasing activity and productivity.

For businesses, implementing changes to SSP comes with logistical hurdles. Adjusting payroll systems to account for day-one payments and recalculating budgets to accommodate higher sick pay could prove costly, particularly for smaller organisations with limited resources.

Labour’s campaign promises, which include strengthening SSP as part of the Employment Rights Bill, have been welcomed by unions but met with scepticism from the business community. The Department of Work and Pensions has argued that reforms will improve fairness and health outcomes, but many employers remain unconvinced.

The government must tread carefully. Expanding SSP could alleviate financial hardship for workers and reduce the risk of disease transmission in the workplace, but businesses argue that these benefits must be weighed against the costs. As McKenzie puts it, “The real impact could smother affordable wage rises and job creation over the coming years.”

The broader question remains: how can the economy remain productive if workers are paid more to stay home? While unions argue that improved sick pay policies support public health and long-term economic stability, businesses fear these measures could erode competitiveness and strain fragile sectors.

The debate ultimately hinges on balancing protecting workers’ rights and ensuring business viability. Policymakers face the challenge of crafting reforms that address both concerns without tipping the scales too far in either direction.