Reposted from AccountingWeb
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An independent review of sickness absence ‘Health at Work’ was published in 2011, by Dame Carol Black and David Frost. It presented a detailed analysis of:
- the impact of sickness absence on employers, the State and individuals
- the factors which contribute to and prolong sickness absence and which, in too many cases, mean employees move out of work and on to benefits
The UK currently loses around 130 million days due to sickness absence per year, with a significant cost to employers, individuals and the state. From the Department for Work and Pensions (DWP) perspective, this has an implication for the number of claims made to employment and support allowance – their health-related benefit offering financial support if an individual is unable to work and personalised support if found able to work.
The ‘Health at Work’ review made several recommendations, one of which was the abolition of the percentage threshold scheme (PTS). This scheme compensated mainly smaller employers for high rates of sickness absence by allowing them to reclaim any amount of statutory sick pay (SSP) which exceeded 13% of their National Insurance Contributions (NICs) bill for the month.
The government agreed to this recommendation on the premise that in return they would use the funds saved to provide a new health and work assessment and advisory service, to start in 2014. So the PTS has duly been abolished from this tax year, 2014/15 onwards and the new health and work service is currently being developed.
Claiming PTS after 5 April
Employers who are claiming under PTS have to advise HMRC of the amount of SSP they have paid to their employees. If SSP is paid but there is no entitlement under PTS then no data is reported to HMRC. As PTS is being abolished there will be no instances when HMRC will require SSP data to be reported. This means the data items that are currently shown on the full payment submission (FPS) and the employer payment summary (EPS) for SSP and SSP recovery are being removed from 6 April. This change was necessary to ensure that employers did not claim PTS when there is no longer an entitlement. However employers will still be able to make late claims under the PTS for periods of sickness up to 5 April for a period of two years. They will be able to do this via the clerical process for non-RTI years or earlier year update (EYU) and EPS for RTI years.
Considering the situation where employers are not actually paying SSP until after 6 April, for a period of sickness up to 5 April, there will no longer be the data items to report SSP and SSP recovery. A number of possible workarounds have been considered to allow employers to notify HMRC of the payment and recovery but for various reasons have been disregarded. These are mainly to do with HMRC’s banking systems and could cause incorrect under or over payments being recorded against an employer’s liability.
HMRC has now confirmed to us that where a payment for SSP is being made from 6 April 2014 for a period of incapacity that fell before 5 April 2014 but has been notified late you will need to make an application for recovery using the form SP32 ‘Late claim for recovery of statutory payments or National Insurance contributions compensation’.
If however you have already paid statutory sick pay but simply not yet recovered it for a closed tax year you will need to follow the normal process for making adjustments to a closed year. Late claims using the SP32 for up to six years can currently be made up to 5 April 2016, beyond which time no further claims under the percentage threshold scheme can be made. HMRC has confirmed that PTS recovered through the SP32 process will repaid by way of payable order. It will not be set-off against the current tax year.
Employers will still have the obligation to produce SSP records to show they are meeting their legal SSP obligations, should HMRC require them but they will have the freedom to keep records in a more flexible manner which best suits their organisation.
In short, employers will still have to pay SSP but they will not report this separately to HMRC. Also they will need to keep records for PAYE purposes to show that SSP has been paid. So for payroll/software SSP has to be included as part of the overall calculation of earnings and tax and NICs liability but the specific amount of an employee’s pay that is made up of SSP does not have to be reported to HMRC separately. It is the overall records of the calculation of earnings that HMRC would require as part of a compliance check.
The latest guidance states that employers must keep records for HMRC for three years from the end of the tax year they relate to, including:
- all sickness periods lasting at least four days
- your SSP payments
- any weeks you didn’t pay and why
Health and Work Service
The Health at Work review also made a recommendation for the government to fund an “Independent Assessment Service” to “provide an indepth assessment of an individual’s physical and/or mental function. It would also provide advice about how an individual on sickness absence could be supported to return to work”. The reviewers suggested this could be funded by the abolition of PTS, the money saved from this being estimated at £50m a year. Hence the new provision of the Health and Work Service, which the DWP and the Treasury are introducing later this year. There are two elements to the service:
- Assessment – once the employee has reached, or is expected to reach, four weeks of sickness absence they will normally be referred by their GP for an assessment by an occupational health professional, who will look at all the issues preventing the employee from returning to work
- Advice – employers, employees and GPs will be able to access advice through a phone line and website
Following an assessment, employees will receive a return to work plan with recommendations to help them to return to work more quickly and information on how to get appropriate help and advice.
The thinking behind the new service is that it will ultimately save employers money as it will provide occupational health advice and support for employees, employers and GPs to help people with a health condition to stay in or get back to work. The government will also be introducing a tax exemption of up to £500 a year for each employee on medical treatments recommended by the Health and Work Service or an employer-arranged occupational health service.
A Health and Work Service contractor is currently being procured but we have not been given a fixed date in 2014 for the introduction of the new service. There has been no mention of the service being mandated and this would require primary legislation to enforce, so it may be up to employers to include appropriate wording into contracts of employment to compel employees to attend assessments if absent for longer than four weeks.
It will certainly be interesting to see if the new service actually helps businesses reduce sickness absence and save money or whether it becomes merely another administrative burden for employers to contend with.