Employers' protest wins sick pay review

THE GOVERNMENT has agreed to hold a fundamental review of statutory sick pay following angry protests from the Institute of Directors over new legislation shifting the cost to employers, which was pushed through the Commons in one day.

Ministers have also agreed to examine a proposal from the employers' organisation to allow firms offering generous occupational sick pay to opt out of statutory sick pay.

The concessions come within days of a letter from the institute to Peter Lilley, Secretary of State for Social Security, complaining that the Statutory Sick Pay Bill was being 'guillotined' without any opportunity for business representations or informed debate.

The reduction in employers' National Insurance contributions, announced by Kenneth Clarke in his Budget speech, cut little ice with the institute, which complained that firms would still carry a heavy burden of administration and compliance costs.

The Government's response came in a little-noticed announcement by William Hague, a social security minister, when winding up Wednesday night's Commons proceedings on the sick pay Bill. It has agreed to examine the scope for cutting red tape without affecting employees' rights.

The Federation of Small Businesses is considering a legal challenge to the Government's decision to transfer costs of the sick pay scheme to employers, writes Rosie Waterhouse. It is also considering renegotiating millions of contracts of employment which assume that the state will pay sick pay while the employer tops up the amount to full salary.

The action was agreed at a meeting of the federation after revelations that transferring the cost of sick pay to employers will hit thousands of smaller companies - in spite of the implication in Mr Clarke's Budget speech that only the largest companies would be affected.