Ms Maeve McElwee:

IBEC welcomes the opportunity provided by the joint committee to comment on the sick leave Bill 2021. In addition to the statement we will make today, we intend to provide the Department with a more detailed submission setting out the views of our members on the Bill as it progresses.

IBEC contends that the introduction of statutory sick pay poses a significant cost to employers, particularly small and medium enterprises, SMEs, and those sectors that have been most impacted by the Covid-19 pandemic. We understand that it is the Government's intention to develop a scheme that is fair and affordable with minimum complexity and administrative burden for both employers and the State. However, IBEC submits that the introduction of statutory sick pay, in the manner proposed, will give rise to a disproportionate cost burden to employers. This is at a time when businesses continue to contend with the challenges posed by both Covid-19 and Brexit. There are additional costs involved in the replacement of skills, with little or no notice, which are lost during a period of sick leave.

While the Bill provides an exemption for employers that already operate a company sick pay scheme, the criteria for determining whether an existing scheme is more favourable than statutory sick pay are so stringent that they will likely result in many employers being faced with the cost of administering a company scheme in addition to the payment of statutory sick pay. For this reason, IBEC submits that the Bill as currently drafted will place excessive costs on employers, regardless of whether businesses have existing company sick pay schemes in place.

The Bill provides that the Minister may make regulations for the purpose of prescribing the daily rate of statutory sick leave payment. As the regulations will not be published until the Bill has been enacted, we do not have full sight of what the prescribed rate will be. However, we understand from the regulatory impact assessment, RIA, and the general scheme of the Bill that statutory sick leave payment will be at a rate of 70% of the employee's normal rate, subject to a daily earnings threshold of €110. The daily threshold is based on 2019 mean weekly earnings of €786.33 and equates to an annual salary of €40,889.16. The Department has stated in the RIA that setting the rate at 70% is to ensure excessive costs are not placed on employers, which in certain sectors may also have to deal with the cost of replacing staff who are out sick at short notice. However, the proposed payment is undoubtedly favourable when compared with sick pay schemes in other jurisdictions, including Northern Ireland where statutory sick pay is paid at a rate of £95.85 per week. Further, while the Government's stated intention in setting the sick pay entitlement at this level is to provide a minimum level of protection to low-paid workers who may have no entitlement to company sick pay schemes, basing a statutory sick pay entitlement on an annual salary of €40,889.16 goes beyond protecting those who are low paid.

The Bill provides for an entitlement to three statutory sick leave days, which may be increased by ministerial order. IBEC understands from the RIA that the Government's intention is to increase the number of statutory sick leave days to ten by 2025. While the phased introduction of this cost is to be welcomed, IBEC submits that a potential increase in costs of €1,100 per employee per annum is excessive. This amount does not recognise the costs to the business of replacing staff who are absent on sick leave, often at short notice.

The entitlement to statutory sick leave in the Bill is granted on a per annum basis. IBEC submits that this entitlement should be specified to be within a rolling 12-month period rather than in one calendar year. This is a common feature of company sick pay schemes. Should an employee take three statutory sick leave days at the end of December and then become entitled to another three days of statutory sick leave a week later, in the new calendar year, this would be financially difficult for employers. The extension to ten days, as indicated, will exacerbate this issue for employers, with greater challenges again for those with peak trading over December and January. This is particularly the case for SMEs which do not already operate a company sick pay scheme and therefore may be disproportionately impacted.

The Bill provides that the entitlement to statutory sick leave arises once an employee has completed 13 weeks of continuous service, which is a significant reduction from the six-month service requirement proposed in the general scheme. This is a matter of concern for IBEC and its members as many company sick pay schemes do not take effect until an employee has six months of service and-or has passed a probationary period. A recent survey of IBEC members found that 60% of the 307 respondents who operate a company sick pay scheme had a six-month service requirement in place. Of particular concern is that the exemption in respect of company sick pay schemes only applies where the company scheme is more favourable than statutory sick pay. As a result, employers with a service requirement in excess of 13 weeks will be required to pay statutory sick pay of up to ten days per annum in addition to any entitlements arising under the company sick pay scheme.

IBEC welcomes the principle of the non-application of the obligations under the Bill to employers which operate company sick pay schemes. However, section 9 as currently drafted undermines its effectiveness. IBEC submits that an exemption from paying statutory sick pay should apply where an employer operates a company sick pay scheme that is no less favourable than statutory sick pay.

Where the employer’s scheme is at least equivalent to the statutory entitlement, it should not be required to pay twice.

Second, the matters which are stated to be taken into consideration when determining whether a company sick pay scheme is more favourable are overly stringent and will exclude many employers that may operate very generous sick pay schemes. Specifically, as noted, company sick pay schemes often include a service requirement of six months or more. Company sick pay schemes often do not apply until the fourth day of absence, in line with the payment of illness benefit, and they often operate on a rolling basis, whereas the statutory entitlement set out under in the general scheme is based on a calendar year. While the general scheme states that the benefits must, as a whole, be more favourable to the employee, it appears likely that very generous company sick pay schemes may fall outside the scope of this section 9 exemption where certain terms of the scheme differ from the statutory sick pay requirements. This could result in employees who already have generous sick pay entitlements under their contracts of employment receiving an overlapping increased sick pay benefit at a disproportionate cost to their employer. The unintended consequence of this wording is that employers will likely seek to mitigate costs by reducing benefits over the statutory requirement or offering lesser terms to new employees. This in turn would threaten industrial relations stability in the longer term.

IBEC and its members are concerned that although the Government intends the statutory sick pay scheme to be fair and affordable, for many companies, above all SMEs, the introduction of statutory sick pay will present a disproportionate cost burden, particularly in the current environment. That cost will only be heightened where companies have the additional cost of replacing skills, with little or no notice, lost during a period of sick leave. While IBEC supports the exemption of companies that already operate company sick pay schemes from the obligations of the proposed Bill, it appears from the current drafting that many employers who already operate sick pay schemes will not be in a position to avail of this exemption, which is of great concern to our members. IBEC submits that any statutory sick pay scheme that is introduced must be sustainable and not represent a disproportionate cost. In this regard, as much of the detail that will affect IBEC members will be set out in the subsequent regulations, IBEC will be seeking to engage with the Department on their drafting. It is vital that IBEC is consulted in order to ensure that any proposed statutory sick pay scheme is fair and affordable, as well as manageable and operable, for employers across the board. The scheme should include the introduction of tools for managers to be able to operate the scheme, manage and address issues that may arise around sick pay, none of which is currently included in the legislation.