SSP, sick notes and incapacity: welfare reform proposals
A shake-up of the statutory sick pay system is just one of the proposals in the government's green paper on welfare reform that will affect the way employers manage workers' health.
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This article examines the workplace implications of the recent green paper on welfare reform.
Employers will be expected to help reduce the number of people claiming incapacity benefits by recruiting from the long-term sick and disabled, but research suggests they remain to be won over.
Proposed simplifications in the statutory sick pay system could cut employers' administrative costs from £55 million to £36 million a year.
The Med 3 form used by GPs to certify sickness will require more detailed information on a patient's fitness for work. GPs' remuneration could be linked to performance in supporting return to work.
The government is working with insurers to examine whether employers with good workplace health records can be rewarded through reduced employer's liability insurance premiums.
The government is to consider "additional levers and incentives" to drive through improved absence performance in the parts of the public sector with above-average absence levels. |
The government's long-awaited green paper on welfare reform1 focuses on providing people with the support to remain in or return to work, and reflects a shift in official policy away from incapacity to employability (see box 1).
The Pathways to Work approach of supporting people into work and off incapacity benefits - piloted in a number of benefit districts over the past three years - will form the basis for the new emphasis on employability. However, many commentators are already raising concerns about the resources that will be required for a countrywide roll-out of such a resource-intensive scheme.
The Department for Work and Pensions (DWP) points out that employers will also be expected to play their part in making the reforms work. But there are doubts that many organisations are actually prepared to recruit from the pool of people with a history of long-term absence from work, according to recent research by the Chartered Institute of Personnel and Development (CIPD)2.
Finding 2 million more jobs
The overall objective underlying the proposed reform of incapacity and other benefits contained in the government's January 2006 green paper is to achieve an 80% employment rate for people of working age. The employment rate has hovered around the 74.5% mark for the past five years, and a rise of some 5.5 percentage points represents finding jobs for just over 2 million people below state pension age.
This will be achieved, the government states, by reducing the number of people on incapacity-related benefits by 1 million over the next 10 years, together with helping a similar number of older workers aged 50-plus into employment and getting 300,000 lone parents into jobs.
It describes the proposed reforms as a "once-in-a-generation" opportunity to transform the welfare state. They include a £360 million countrywide roll-out of the Pathways approach, incorporating work-focused help for people to get back to work after periods of long-term absence due to ill health or disability.
A three-fold rise in the number of people claiming long-term incapacity benefits between the late 1970s and the mid-1990s - from 700,000 to 2.6 million - provides the context for the latest green paper proposals.
In the past 10 years, the characteristics of claims have shifted so that new claimants no longer only come from the former industrial heartlands of the north and the Midlands, but from all regions of the country. This is linked to the fact that one-third of new claimants cite mental health conditions as the primary cause of disability, up from one-fifth in the mid- 1990s.
Although the number of new claims has fallen by one-third since this time, in all 2.74 million people were claiming incapacity-related benefits in May 2005.
Once on benefits, people tend to stay on them. This has drastic consequences for individuals - a person is more likely to die or retire than find work after two years on incapacity benefits, despite the fact that 80% to 90% of those who begin to receive benefits expect to work again.
The current system has several inherent problems that prevent people on benefits from viewing work as a realistic aim. Little is done to stop people becoming claimants in the first place, and the process by which they move onto the benefits (the "gateway") is poorly managed, so that many people start to receive benefits before satisfying the main medical test.
People receive a higher rate of benefit the longer they remain incapacitated, providing a perverse incentive for individuals to fulfil a "sick role", the government says. Benefit claimants are not expected to undertake any work-focused activities, and there is little support available for individuals to undertake such activities in any case.
Employers' attitudes
All stakeholders, including employers, must work together to tackle the challenge of cutting the number of people on incapacity benefits by 1 million in the next 10 years, the government argues.
However, the CIPD research suggests that the detailed plans in the green paper will need to tackle employers' reluctance to employ long-term ill or disabled people for this to happen. It has found that one in three employers deliberately rejects applicants with a history of long-term sickness absence or incapacity, and only 3% target these groups as part of their recruitment strategies.
A large proportion of employers thinks that people on long-term incapacity benefits would make less adaptable employees, and 45% believe they would be less reliable. This wariness by employers presents an "obvious problem" for the government as it attempts to make big cuts in the number of incapacity benefit claimants, according to the CIPD's John Philpott. Rather than confronting it, he says that the employer dimension is a missing, or at least understated, element in the government's approach.
The CBI takes a different view, pointing out that 60% of all firms already offer some rehabilitation to help people get back to work after sickness absence, and that many employers are willing to play a full role in bringing back those who want to work. "But the government must support companies in reskilling those who have been out of work for some time, and contribute to the consequential costs of special equipment, transport or mentoring," it argues.
Improving workplace health
The welfare reform green paper states that the government's new Health, Work and Wellbeing strategy, launched last autumn3, represents a catalyst for the creation of healthy workplaces. It cites its plan to improve access to good quality occupational health support, and facilitate better absence management and early interventions on the part of employers.
Under the welfare reform proposals, the government will examine ways of improving the provision of, and access to, interventions for managing common mental health problems in particular. It recognises that these are a significant cause of long-term absence, and that the waiting times for NHS treatment are often very long.
The public sector is once again under the spotlight, with the green paper proposing to consider "additional levers and incentives" to drive through improved absence performance in those parts of the public sector with above-average absence levels.
The green paper reports on recent initiatives that are designed to ensure that employers' liability compulsory insurance premiums reflect organisations' health and safety performance, so that good performance is reflected in lower insurance costs. The government is working with trade unions and insurers to encourage the development of products that help to increase workers' chances of a speedy rehabilitation.
A partial regulatory impact assessment published by the government alongside its green paper talks of working with insurers to see whether good practice employers can be rewarded through an accreditation scheme that allows access to reduced liability premiums. It also asks for other ideas of incentives for employers to provide increased health support to the workforce.
Pathways for all
The government intends building on the progress already made with its Pathways to Work pilots of work-focused help for people to return to work (see box 2) by extending provision across the country by 2008.
However, it is not clear whether all elements of the Pathways approach will be replicated exactly during this roll-out, as the green paper states that work-focused support will only increase over time, in line with "capacity and affordability". Customers, personal advisers, employers and service providers have responded positively to the pilots, the government claims, but adds that the next phase of Pathways will need to be delivered "in innovative and more cost-effective ways".
Trade unions and others are already raising questions about the resources needed to implement a nationwide version of the Pathways approach. Phil Gray, chief executive of the Chartered Society of Physiotherapists, believes that the green paper proposals have the potential to revolutionise welfare reform, but that the details on how they will be resourced are lacking. "The reality is that without serious investment in rehabilitation and physiotherapy in particular, these ideas will fail," he believes.
It is clear from the green paper that the roll-out will be delivered primarily by the private and voluntary sectors, rather than by public sector agencies such as Jobcentre Plus. The green paper states that the next stage of welfare reform "will need to engage private and voluntary sector providers", and that bids will be invited "for outcome-based contracts as we roll out Pathways to Work nationally".
The TUC has concerns about the proposal to place delivery of the promised Pathways roll out in private and voluntary sector hands. "The voluntary and private sectors can add value to the work done by Jobcentre Plus, but Britain would be the poorer if we abandoned the principle of a publicly provided employment service," the TUC says.
The head of public sector union PCS argues that there are not enough DWP staff to roll out Pathways, but also has major concerns that the government plans to fill this gap by using the private sector. "We will be seeking clarification on whether the government has any plans for privatisation and asking what staff numbers they project for the implementation of the proposals," says PCS general secretary Mark Serwotka.
Work-focus for new benefit
A new Employment and Support Allowance (ESA) will replace incapacity benefit, and the income support paid on the grounds of incapacity, to new claimants from 2008 under the terms of the green paper proposals. In return, most people will have to attend work-related interviews, agree an action plan focused on rehabilitation (see table for an example) and, crucially "as resources allow", participate in some form of work-related activities once they complete a three-month assessment phase (again suggesting that the government will adopt a less than whole-scale approach to the roll-out of Pathways).
Once engaged in work-related activity, claimants will receive a higher rate of benefit than during the initial assessment phase, which is likely to be above the current rate paid to people who have been on incapacity benefit for some time. However, sanctions will apply, so that those who refuse to take part in work-focused activity will have their benefits cut in a series of slices, ultimately to the level of the jobseekers' allowance. Individuals with the most severe disabilities will receive ESA - at a higher level than benefits currently paid - without fulfilling these conditions, the green paper proposes.
The process for agreeing entitlement to the new ESA will also be tightened up so that, for example, the current personal capability assessment will be transformed to focus on people's capabilities for work, rather than only their entitlement to benefits. The name of the assessment will also be changed to reflect its new focus on enabling work, amid some evidence that it is currently stigmatised. The mental health component of the assessment, which has recently been criticised by doctors and others, will be reviewed to ensure that it reflects the type of mental health conditions prevalent today. The DWP is convening an experts' group to undertake a comprehensive review of it.
Simpler SSP
The government acknowledges in the green paper that the current complex record-keeping required of employers in administering the current statutory sick pay (SSP) system does nothing to support effective sickness absence management. Employers want fewer rules, complications and requirements for record-keeping, it believes.
The welfare reform green paper proposes a much simpler way for employers to assess when entitlement to SSP arises, and when the maximum period of entitlement has been reached, by abolishing a range of measures. This will include removing the need to apply the current three waiting days before an employee can first become entitled to SSP. It also proposes to remove the requirement on employers to link periods of sickness that are separated by no more than eight weeks.
Under the revised system, SSP would become payable on the first day a person is sick and absent from work, and the maximum period during which the benefit would be payable would be 28 weeks from this date. The "overly complex" percentage threshold scheme would also be abolished and the money saved used to support small employers to help staff return to work quickly.
The partial regulatory impact assessment produced to support the green paper calculates that removing waiting days, the proposed changes to the linking rules, and the resulting reduction in record-keeping, will cut the time employers have to spend on administering SSP. If administration time is cut by 10 minutes for each spell of absence, the government calculates that the cost to employers of administering SSP will fall from around £55 million to £36 million a year.
Rewarding GPs' rehabilitation efforts
The previously much-trailed idea of providing GPs with incentives to issue fewer sick notes has been translated in the green paper into a proposal to use the payment-by-results element of the current GP contract to incorporate GPs' rehabilitation performance.
The green paper states that the government will identify GP interventions that improve the prospects of vocational rehabilitation, and incorporate performance against these into GP and other primary care contracts. The aim is "to reward primary care staff who take active steps to support individuals to remain in, or return to, work".
Employment advisers will also be placed in GP surgeries in some of the Pathways pilot areas. These advisers will provide a coordinated service to off-sick workers visiting GPs, including providing vital initial advice, support and reassurance on the full range of work-related issues, together with referral to appropriate provision.
Access to this help will be voluntary and open to any patient by self-referral or recommendation from a health professional. This means that workers on SSP, or their employer's equivalent, will be able to gain access to the wider work-focused help available to those on incapacity-related benefits, including the condition-management programmes that are proving so effective in the Pathways areas.
The British Medical Association welcomes this idea, but only if the advisers are supportive in helping patients back to work, "rather than acting as an enforcement arm of the DWP with the sole purpose of getting people off benefit".
The format of the Med 3 form used by GPs to certify the majority of medium-term sickness absence will be revised to encourage the provision of more comprehensive and robust fitness for work advice. This revision will also provide tools for the evaluation and audit of movement of workers on to SSP and the new ESA.
GPs argue that their ability to provide help on fitness for work is constrained by a lack of specialist occupational health knowledge. The green paper tackles this by proposing to pilot an occupational health advice line for family doctors to help them manage the health of their working age patients, and will also establish GPs with a special interest in occupational health within primary care trusts or practices. The online learning modules for GPs on fitness for work developed by the DWP's corporate medical group will also be developed further.
1A new deal for welfare: empowering people to work, Department for Work and Pensions, 24 January 2006. The formal consultation period ends on 21 April 2006.
2Welfare reform plan must tackle employers' doubts about the employability of long-term incapacity benefit claimants, press release, Chartered Institute of Personnel and Development, 23 January 2006.
3More words or an ambitious programme for action?, IRS Employment Review 836, 2 December 2005.
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Box 2: Pathways to Work evaluation supports its extension Evidence on the performance of seven Pathways to Work pilots running in 2003/04 "is very encouraging", according to a report1 recently published by the Department for Work and Pensions. The Pathways approach is central to the government's aim of reducing the rates of people moving on to, or remaining on, incapacity benefits. The pilots use a combination of work-focused interviews and the provision of other services and benefits to refocus people onto the prospect of returning to work. Seven districts were involved in the pilots during 2003/04, and a further 14 are currently being added, so that the approach they enshrine will be used in around one-third of English benefit districts by October 2006. All people making a new claim for incapacity benefit in the pilot zones must attend a work-focused interview eight weeks after making their claim, and non-attendance can lead to sanctions, including deductions of benefits. Further interviews take place around every four weeks with those claimants who have not been assessed as having a severe illness or disability. The regular work-focused interviews are backed up by a package of programmes aimed at improving claimants' labour market readiness and opportunities, including condition-management programmes. These are run in cooperation with local health providers and aim to help individuals manage their disability or health condition. For example, cognitive behaviour therapy is offered to those with common mental health problems. In-work support is also available and can include mentoring, occupational health support, financial advice/debt counselling and job coaching. All existing incapacity benefit claimants in the Pathways areas have been able to participate in its programmes on a voluntary basis since February 2005. Evidence from the pilot districts shows that: the proportion of people moving off incapacity benefits increased by eight percentage points in the pathways districts, and there is no evidence that these people are simply transferring to other benefits;
almost 20,000 people taking part in the Pathways pilots moved from benefits into jobs in 2003/04;
take-up of the package of programmes designed to improve labour market readiness runs at around 21%, including 7,500 people on condition-management programmes; and
existing benefit claimants also appear interested in taking part in the Pathways projects - 13,600 work-focused interviews have been conducted and 210 job entries have taken place since the scheme was extended to existing claimants in the pilot areas in February 2005.
1Incapacity benefit reforms - Pathways to Work pilots performance and analysis (PDF format, 629K), Department for Work and Pensions, 2006. |
From benefits to work: an example action plan
The government's green paper on welfare reform suggests that the following activities are suitable for inclusion in the action plans that new claimants for incapacity benefits will be required to agree if its proposals become law.
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Activity type |
Examples |
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Work tasters |
Work trials Voluntary work Permitted work Preparation for self-employment |
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Managing health in work |
Condition-management programmes Progress to Work programme NHS Expert Patients programme |
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Improving employability |
Undertaking a basic skills programme Over-50s confidence in working programme Jobcentre Plus or external training programmes |
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Jobsearch assistance |
New Deal for Disabled People Job Brokers Additional support from other specialist Jobcentre Plus advisers, such as disability employment advisers, New Deal 50 plus, New Deal for Lone Parents or similar external programmes Independent job search |
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Stabilising life |
Activities to stabilise health conditions (including mental health problems), for example, use of cognitive behavioural therapy Assessing childcare options Managing financial situation Stabilising housing situation |
Source: A new deal for welfare: Empowering people to work (PDF format, 1.11MB), Department for Work and Pensions, 2006.
