FSB: Sickness absence costs small businesses £1,500 per year, new figures show

Government must introduce a small employer’s relief for the recovery of statutory sick pay (SSP), as new figures from the Federation of Small Businesses (FSB) show that sickness absence costs small businesses on average £1,500 per year.

Long term sickness absence does not affect the smallest of businesses frequently, but when it does it has a big impact and the costs can be high. The FSB’s ‘Voice of Small Business’ survey panel shows that on average small businesses only experience 2.4 days sickness absence per employee each year – much lower than the national average 7.7 days per employee – 25 per cent said that they experienced no sickness absence at all and 81 per cent said that they were not at all affected by long-term sickness absence.

However, in the last 12 months sickness absence cost firms on average £1,500, but for nine per cent it cost more than £5,000. So it is important that the Government does more to help with the costs of sickness absence in the smallest firms.

Currently, some small businesses can feel confused by the Percentage Threshold Scheme – the current system used to calculate how much SSP an employer can claim back. This means that many small businesses either have to spend time doing difficult calculations or they have to spend money on buying in help.

With 40 per cent of small business employers claiming that dealing with holiday entitlement and sickness absence was one of the most difficult aspects of employment law, the FSB believes that recovery needs to be simplified so micro firms can reclaim all SSP costs more easily to stop them from being hampered at such a difficult time.

The FSB is calling on the Government to introduce a small employer’s relief for all firms with an annual National Insurance Contributions bill of less than £45,000 to recover SSP. This relief would be like that used for reclaiming statutory maternity pay and would use the same calculations. As a result, it would ease the administrative burden, as well as helping businesses manage sickness absence better.

Small firms care about their staff and want to invest in their health where they can. However, Government must understand the pressures small firms are under, and that this is one pressure among many. This needs to be recognised within the soon to be published independent review into sickness absence.

It will also need to recognise that small firms are not able to cope with an increase in the burden of responsibility or an increase in regulation, but that by better supporting small businesses, they could be able to improve the way that they manage sickness absence.

The Government should look at improving the way the Fit Note is used by making it electronic and increasing the training that GPs are given on how to use it.

Small businesses also need better access to free occupational health advice either through GPs or via the national occupational health phone line to make this issue easier to manage.

John Walker, National Chairman, Federation of Small Businesses, said:

“Small firms act like a tight knit family and value the contribution their staff bring to the business. And research shows that staff in smaller firms are more often committed and loyal. But sickness absence is one of the most complex pieces of employment law they have to deal with. It can also be costly with small businesses paying around £1,500 over the past 12months. The Government must provide a small employers relief for statutory sick pay in the same way they do for statutory maternity pay so those small businesses that experience a member of staff on long-term sickness absence, are not hampered and are given the support they need.”

ENDS

Notes to Editors

The FSB is the UK's leading business organisation with more than 200,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk

To view a copy of the paper ‘Health matters 2011’, go to www.fsb.org.uk

The survey is based on 1,633 responses from the June 2011 FSB ‘Voice of Small Business’ Survey Panel of FSB members in England and Wales which took place between in June 2011. For full results, go to www.fsb.org.uk/fsb-survey-panel

Statutory sick pay is currently worked out by calculating the daily rate for your employee by dividing the weekly rate by the number of qualifying days in that week. For statutory sick purposes, the week always begins on a Sunday. In 2011-12, the weekly rate is £81.60.

5. The general principle of the Percentage Threshold Scheme is that if, in a tax month, the total statutory sick pay you pay to all of your employees is more than 13 per cent of your total gross employer's plus employees' Class 1 National Insurance contributions (NICs) for the same tax month, you are entitled to a refund of the excess.

The reference to 40 per cent of small businesses dealing with holiday entitlement was answered by a restricted base of members that spend time ensuring compliance with employment regulations only, not the full base.

On 17 February 2011 the Government called for a major review of the sickness absence system in Great Britain in order to help combat the 150 million days lost to sickness absence every year. The independent review aims to increase the number of people in employment and contribute to sustainable economic growth. It will explore a wide range of options for structural reform and rebalancing incentives in the management of sickness absence. It is jointly chaired by David Frost, former Director General of the British Chambers of Commerce and Dame Carol Black, National Director for Health and Work. The review will consider:

· how to reduce the overall cost of the sickness absence system, and
· the overall balance of these costs between the state and employers.

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Contacts

Andrew Cave, Chief Spokesperson: 07917 628991
Prue Watson: 020 7592 8121 / 07825 125 695 prue.watson@fsb.org.uk
Sara Lee: 020 7592 8113/ 07595 067068 sara.lee@fsb.org.uk

For regional FSB contacts please go to www.fsb.org.uk/regions