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11 Jan, 2022

Sick pay costs will come as an ‘unwelcome burden’ to many small businesses

Plans to introduce statutory sick pay are expected to impact payroll costs this year, writes Mary McDonagh, our Head of HR and Payroll.

In June 2021, the Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar TD, announced details of a statutory sick pay scheme which will give workers the right to paid sick leave.

Background

Currently, while large employers often provide sick pay for their employees, many lower paid workers in the private sector do not have the security of knowing that if they fall ill and miss work, they won’t lose out on a full day’s pay. The problem was highlighted during the pandemic when workers in meat factories who contracted COVID-19 could not afford to take days off. Statutory sick pay is intended to address this issue and will bring Ireland into line with other advanced countries in Europe.

Implications for employers

Details of the proposed legislation were recently published in a draft Statutory Sick Leave Bill. This may be subject to amendment as it makes its way through the legislative process. Employers need to monitor developments and begin planning for the impact on their business. Those who do not currently have a sick pay scheme will need to budget for the additional cost of providing Statutory Sick Pay while companies with sick pay schemes will need to incorporate Statutory Sick Pay into their existing schemes.

How Statutory Sick Pay will work

It is envisaged that statutory sick pay will be phased in over a four-year period starting this year in 2022 with employees entitled to paid sick leave for three days next year, rising to five days in 2023, seven days in 2024, and 10 days in 2025. Unlike many existing company sick pay schemes which have a three-day waiting period, employees will receive sick from the first day of illness. The rate will be 70% of an employee’s wage, subject to a daily threshold of €110. This threshold can be varied by Ministerial Order.

To qualify for statutory sick pay, employees must have completed 13 weeks continuous service with their employer and will have to obtain a medical certificate stating that they are unable to work. Once entitlement to sick pay from the employer ends, employees who need to take more time off may qualify for illness benefit from the Department of Social Protection subject to PRSI contributions.

Disputes

Eligible employees who do not receive Statutory Sick Pay or are penalised by their employer for availing of the scheme will be able to pursue a complaint.  Disputes between employers and employees will be subject to investigation by the Workplace Relations Commission and rulings of the Labour Court.

Need help?

Coming in the wake of recent enhancements to parental, paternity and maternity leave, the cost of providing Statutory Sick Pay will be an unwelcome burden on many small businesses, particularly those in sectors like hospitality, leisure and tourism, who are struggling from the impact of Covid-19 restrictions. Advice on how to plan for the forthcoming changes is available from your local ifac office.