What will the budget changes to Illness Benefit mean to Employers?
There have been mixed opinions on Budget 2014. Relief that tax rates have not been increased. Anger at cuts to pensioners and maternity benefits. But how will Budget 2014 affect employers?
An unexpected announcement made in the Budget and one that has been relatively unreported in the media was the rise of waiting days for Illness Benefit from after 3 days leave to after 6 days leave. Despite the lack of media attention this is not something employers can ignore!
The effect of sick leave on employers
Sick leave already has a significant negative effect on Irish businesses. According to IBEC’s 2011 Guide to Managing Absence over 11 million working days are lost in Ireland every year due to sickness, costing businesses €1.5 billion or €818 per employee. The report also found that on average employees missed 5.98 days per year.
Impact of the illness benefit change to employers
No matter how you approach sick leave and sick pay in your company this budget change is very likely to have a negative impact on your business:
A. If, as an employer, you pay company sick pay in addition to illness benefit, you will be facing increased costs.
For Example: An employee earns €300 per week and is off sick for 1 week*[i]:
|
|
Company Sick Pay for the 1 week |
Illness Benefit recouped by Employer |
Actual Cost to Employer |
|
Previously |
€300 |
€94 |
€206 |
|
As per Budget 2014 |
€300 |
€0 |
€300 |
|
Additional Cost to Employer |
€94 |
||
Employers need to review sickness absence and sickness pay policies in their contracts of employment and staff handbooks. They need to consider:
- Do the policies specifically refer to the illness benefit received from the State? Do the terms need to be changed?
- Can the company afford the additional cost to their sick pay scheme? Is this something that needs to be amended?
How can companies minimise the impact of sickness absences and the change to illness benefit?
Companies looking to minimise the impact of this budget change, and minimise the cost of sick leave in general, need to look at reducing sick leave levels in the workplace. Prevention is better than cure. Key to reducing sick leave will be to have effective sick leave policies and procedures in place. A sick leave policy will clearly set out the procedures that should be followed by both employees and management in cases of absence through illness. Implementing certain steps, such as having to speak to a manager to report your absence, or back to work interviews are proven to significantly reduce unnecessary sick leave absences. According to the CIPD’s 2013 Absence Management Survey, introducing a new sick leave policy was the top solution implemented by companies to manage short-term absences, with 63% of respondents having updated/implemented a policy.
By reducing the level of unnecessary sickness absence employers will be better placed to support those employees who are genuinely ill and who cannot and should not attend work, whether illness benefit applies or not.
[i] The below assumptions have been made in the example above:
-
Employee normally works 5 days within the day range of Monday to Saturday. For the purpose of illness benefit the week is Monday to Saturday. An employee out of work Monday to Friday will be considered to have been out for 6 consecutive days under illness benefit.
-
Employees initial day of incapacity is Monday
-
Employer normally pays for the entire period of incapacity
Bright Contracts - Employment Contracts and Handbooks
