By Richard Johnstone | 24 April 2014
The government’s abolition of support payments to employers who have to pay out a large proportion of their wage bill on sick pay will make it harder to meet Chancellor George Osborne’s target for full employment, a think-tank has warned.
The Institute for Public Policy Research today said abolition of the Percentage Threshold Scheme, which allowed employers to reclaim Statutory Sick Pay if it was above 13% of their monthly National Insurance Contributions, would make firms less likely to hire workers with long-term illnesses. The ability to claim back the payments was abolished by the coalition this month.
Today’s Small firms, giant leaps: small businesses and the path to full employment report concluded that if the government reinstated the Percentage Threshold Scheme to cover 90% of sick pay costs for small firms, this would help the government reach its employment target.
Small- and medium-sized enterprises, as well as self-employment, accounted for 95% of individuals moving from inactivity into employment between 2008 and 2011, the think-tank’s economic analyst Spencer Thompson said. If the support scheme was reintroduced for smaller firms with an annual National Insurance liability of less than £45,000, these employers would be more able to employ people who had previously been ill, and the cost of the scheme would be cut from around £49m to £23m.
‘If Britain is to get to the vision of full employment recently set out by Chancellor George Osborne, the government needs to do more to help small firms hire people who are suffering from structural unemployment and economic inactivity,’ Thompson added.
‘While a return to growth might help Britain tackle cyclical unemployment, people with structural barriers to work are more likely to be hired by small firms if the government covers more of the risk of further short spells of sickness.’
