Moneytimes: New sick pay scheme is a welcome start

By Jill Kerby

Personal Finance Columnist

The lack of statutory maternity leave in the United States has always struck me as a major failing of work practices there and probably has as much to do with the lack of women company directors as it does their more laissez-faire states-based employment system.

Maternity, and now paternity leave – which is more correctly called parental leave - is far more attractive (and yes, costly to employers) and the leave period with and without pay has steadily increased over the years. We certainly have membership of the EU to thank for this valuable benefit.

Where Ireland has fallen short on the benefits front is occupational sick pay; we have been among only a few EU states that did not require employers to directly pay a worker if they experienced illness and this is something the government has finally addressed with the rolling out of a four-year plan what will eventually see the payment of 10 days sick pay to all employees who currently are not part of such a scheme or are not entitled to an illness benefit.

The new scheme will work this way: starting next year, employees will have three days of illness paid, in 2023 this will rise to five days, in 2024 to seven days and by 2025 to 10 days paid.

Instead of a flat maximum benefit, the sick employee will get a benefit that represents a maximum of 70% of their wage, based on mean weekly earnings in Ireland. The maximum payment per sick day will be no more than €110.

(The way employment sick pay works differs among EU states, but the percentage used varies from 25% to 100% of the employee’s gross wage.

In Northern Ireland, for example, the statutory employment sick pay scheme pays no more than the equivalent of €95.85 per week.)

Setting a percentage threshold means that workers with higher wages will receive a more proportionate benefit. The government has based their formula for employers on the 2019 mean weekly earnings of €786.33 (€40,889 per annum.) The maximum daily payment of €110 is achieved by dividing this weekly figure by five (days) and multiplying by 70%.

Using this formula, a much lower-paid worker, earning say, €450 gross for a five-day working week would be entitled to daily sick pay under the new scheme of €63 a day.

The unions have welcomed the announcement but are concerned that the 2.3% pay increase the government says it represents will impact on future pay claims.

They also note that workers will still need to produce a doctor’s certificate they will need to pay for unless they have a medical card and that it is too long a roll-out period for even the maximum 10 days sick pay. Thousands of workers who became sick with Covid have already been receiving €350 a week (€70 per day) albeit from the State if they have been unable to go to work.

On the plus side even this modest sick payment means that half the countries workers who have only had access to Department of Social Protection Illness Benefit will no longer feel obliged to attend work when they experience a short term illness and this scheme will help tide them over the first three days of sickness which is not covered by the state Illness Benefit scheme.

Currently, Illness Benefit is payable regardless of whether you are part of an employer sick pay scheme. To qualify, you need to be under age 66, can show that you have paid sufficient PRSI contributions and fill out the appropriate IB1 Form, produce the required a doctor’s certificate and notify the Department of Social Protection when you are fit to return to work. (see https://www.gov.ie/en/service/ddf6e3-illness-benefit/ for details.)

Illness Benefit is currently paid at four different rates based on your average weekly earnings in the relevant tax year and the actual numbers of weeks you have worked. Payments are subject to income tax but not to PRSI or USC. The maximum weekly amount payable to someone claiming Illness Benefit is €203, the same rate that applies for unemployment benefit.

The few hundred euro that employers will eventually contribute to sick pay is welcome but there remains one category of workers who cannot claim any state illness benefit and won’t fall under this new employment regulation: the self-employed.

Since November 2019, people who work for themselves can claim Jobseekers Benefit but have to make their own provision for sick pay. The most sensible recourse - aside from having a large pot of cash savings - is to buy an Income Protection Insurance policy that can pay up to 75% of your gross income until retirement age.

We’ll look at how such policies work next week.

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