Tag: low paid workers

Sick pay decision for two million low-paid workers could have huge impact on families’ living standards

How much should someone receive when they are off sick from work?

This is the question that ministers were considering over Christmas. And the answer they arrive at will have a huge impact on many households’ budgets (writes TUC’s TIM CLARK).

For the majority of workers today the answer to that question is straightforward: when they are ill they simply receive their normal salary for a period.

Others, particularly many low-paid workers get less-than-generous statutory sick pay (SSP), currently £116.75 a week, if they are ill. But this only kicks in from the fourth day of absence.

More than a million workers wouldn’t receive anything when absent because they earn too little to qualify under current rules. They are often part-time workers and are predominantly women.

This means many workers face hardship if they suffer illness or injury or risk spreading illness in their workplace by attending while sick.

This could change as ministers implement their promise that “no one should be forced to choose between their health and financial hardship”. 

Measures in the Employment Rights Bill being considered by MPs will scrap the qualifying earnings test and sick pay will be paid from the first day of absence in future.

The options on the table

But how effective these changes will be rest on the percentage rate to be paid to low earners. 

A government consultation on the rate closed earlier this month.

Among the options modelled was an SSP payment as low as 60 per cent of wages.

This would be the entitlement for the lowest paid 2.3 million workers,

Under the current proposals, this could lead to some 1.1 million workers who are currently entitled to full SSP eligible for less under the new system because they currently get full SSP, albeit at less than £117 a week.

The TUC is urging the government to ensure that workers receive the lower of their earnings or statutory sick pay. At the very least they should receive 95 per cent of pay to reflect the payments received by the lowest-earning workers who currently qualify for SSP. 

For this is not a cold exercise in abstract numbers. There is a risk that some low earners could miss out the equivalent of a family’s food budget if ministers opt for lower pay-outs. 

Scenarios set out below show the potential real-world impact of ministers’ decisions.

Scenario one

Rita works 10 hours a week (two hours a day) in an office canteen on the national minimum wage. Her partner is a sales assistant earning £25,000.    

One weekend, Rita sprains her foot and is unable to work that week.

She has no access to occupational sick pay and currently would be unable to claim SSP as she earns under the lower earnings limit of £123 required to qualify. This means that the household income is cut by £114.40 a week. 

She struggles to give her three children money for their daily school meals and out-of-school sports activities and has to use money set aside for the next energy bill.

Under the new system, if the rate is set on the basis of the lower amount of earnings or SSP she would receive £114.40. 

However, a 60 per cent rate, one of the options modelled by the government in its latest consultation would mean she only receives £68.64. This cut of £45.76 is close to what a family spends on school meals for three children every week. 

Scenario two  

Sam is a single parent earning the national minimum wage at a food factory – working part time for nine hours Monday to Wednesday and gets paid weekly. 

Sam catches a nasty cold and is unable to work Monday to Wednesday. She has no access to occupational sick pay, and, under the current system doesn’t earn enough to qualify for SSP.

She claims Universal Credit and by notifying the DWP about a drop in earnings in the next assessment period could receive a higher universal credit payment. But this wouldn’t be paid out for more than a month, leaving her immediate bills to pay.

But if payouts were the lowest of SSP and actual earnings Sam would have received £102.96 in wages.

A 60 per cent rate would mean getting only £61.78. This £41 drop is more than the typical £35.40 that a family in the lowest income decile spends on groceries and non-alcoholic drinks (families overall spent on average £63.50 a week according to the official figures from 2023). 

This means that Sam and her two children would struggle to buy food that week, although they would be better off than currently. 

Scenario three  

Raj works two jobs. On Monday to Tuesday he works part time at a retail store for three hours a day. He works at a florist on Wednesday and Thursday for two hours. 

This is to fit in with caring responsibilities for three children with his wife who works at the local biscuit factory from Monday to Friday (9-5pm). She earns slightly above the national minimum wage, and both Raj’s jobs are on the minimum wage. 

Due to a car accident, he is unable to work for three months – this causes immense pressure on the family finances as during this period Raj receives no earnings.

If he received SSP based on his actual earnings this would have been £114.40 a week.

But at a 60 per cent rate he would receive £68.64 a week. This would mean that over the course of 12 weeks he would receive£549.12 less than if he was getting his normal earnings.

This is equivalent to almost two years’ worth of spending on clothes and footwear for a family in the lowest income decile at £5.60 a week.

Conclusion 

The coronarvirus outbreak showed the dangers of an inadequate sick pay system.

Lots of frontline workers were forced to choose between falling into poverty because they got no or little sick pay, or continue to work and risk spreading the virus.

Four years on and many workers continue to face similar dilemmas every week.

The government is making the right choice in extending sick pay to all workers, without an income test.

But when ministers announce payouts for low-paid workers in the coming weeks, they should peg them to SSP or wages, whatever is the lower. And no-one should be entitled to less after the changes, than they are now.

Then the next stage will be ensuring that the headline rate of SSP is improved.

Budget pay rise for millions of low paid workers

  • Chancellor announces pay rise for over 3 million workers next year, as National Living Wage rises by 6.7% 
  • Pay boost worth £1,400 a year for an eligible full-time worker – a significant move towards delivering a genuine living wage.  
  • 18-20 National Minimum Wage will rise by £1.40 per hour – the largest increase on record – and marks first step towards a single adult rate.  

Over 3 million workers will receive a pay boost after the Chancellor confirmed the National Living Wage will increase from £11.44 to £12.21 an hour from April 2025.  

The 6.7% increase – which is worth £1,400 a year for an eligible full-time worker – is a significant step towards delivering the manifesto commitment to make sure the minimum wage is a genuine living wage.  

The National Minimum Wage for 18 to 20-year-olds will also rise from £8.60 to £10.00 an hour – the largest increase in the rate on record. This £1.40 increase will mean full-time younger workers eligible for the rate will see their pay boosted by £2,500 next year. This marks the first step towards aligning the National Minimum Wage and National Living Wage to create a single adult wage rate, which would take place over time. 

The move comes ahead of today’s Budget which will ‘fix the foundations’ to deliver change by fixing the NHS and rebuilding Britain, while ensuring working people don’t face higher taxes in their payslips. 

It builds on the commitment to be a pro-business, pro-worker, pro-growth Government – delivering a key plank of the Plan to Make Work Pay, which is already set to boost the pockets of the lowest-paid workers by up to £600 a year through the Employment Rights Bill.  

The plan will boost productivity, creating a workforce that is fit and ready to help us deliver our first mission to kickstart economic growth – with good jobs and growth in every part of the country making everyone, not just a few, better off. 

Chancellor of the Exchequer Rachel Reeves said:  “This Government promised a genuine living wage for working people.

“This pay boost for millions of workers is a significant step towards delivering on that promise.”  

Business Secretary, Jonathan Reynolds said: “Good work and fair wages are in the interest of British business as much as British workers. 

“This government is changing people’s lives for the better because we know that investing in the workforce leads to better productivity, better resilience and ultimately a stronger economy primed for growth.” 

Deputy Prime Minister, Angela Rayner said: ““A proper day’s work deserves a proper day’s pay. 

“Our changes will see a pay boost that will help millions of lower earners to cover the essentials as well as providing the biggest increase for 18–20-year-olds on record.” 

The minimum hourly wage for an apprentice is also boosted next year, with an 18-year-old apprentice in an industry like construction seeing their minimum hourly pay increase by 18.0%, a pay bump from £6.40 to £7.55 an hour.     

These increases will mean 3.5 million workers will receive a pay rise this year in total. They confirm the Low Pay Commission’s recommendations, whose advisory remit was overhauled by ministers in July to consider the cost of living.  

Ethics Director at Lush Cosmetics, Hilary Jones said: ““Lush staff making and selling our products are crucial to our success, so we commit to the Living Wage Foundation’s independently calculated real living wage rates each year to feel confident our rates of pay are fair and that our staff can afford what they need to thrive, not just survive.

“In these tough times where the cost of living continues to rise, it is great to see the Government increase minimum wage closer to these calculations to support the hardest working and most vulnerable workers across the UK.” 

Chair of the Low Pay Commission, Baroness Philippa Stroud said:  “The Government have been clear about their ambitions for the National Minimum Wage and its importance in supporting workers’ living standards.

“At the same time, employers have had to deal with the adult rate rising over 20 per cent in two years, and the challenges that has created alongside other pressures to their cost base.  

“It is our job to balance these considerations, ensuring the NLW provides a fair wage for the lowest-paid workers while taking account of economic factors. These rates secure a real-terms pay increase for the lowest-paid workers. Young workers will see substantial increases in their pay floor, making up some of the ground lost against the adult rate over time.” 

Good news for low paid workers, then. but some businesses – small businesses remain the bedrock of the UK economy – point out that it’s not the government that will be paying the pay rises, it’s them.

Coming on top of the likely increase in employers National Insurance contributions likely to be announced today they say that these additional costs could force some small businesses, working on small profit margins, to close.

A Tale of Two Pandemics: TUC exposes COVID Class Divide

NEW POLLING reveals the extent to which low-paid workers have borne the brunt of the pandemic

  • NEW POLLING reveals the extent to which low-paid workers have borne the brunt of the pandemic 
  • TUC analysis shows three industries furthest away from recovery are all low-paid  and have highest rates of furlough use 
  • TUC warns the end of furlough and Universal Credit cut will be a hammer blow for low-paid workers 
  • Union body says without an economic reset post-pandemic the government’s levelling up agenda will be “doomed to failure” 

The coronavirus crisis has been “a tale of two pandemics”, the TUC said today as it calls for an urgent “economic reset” to tackle the huge class divide in Britain that has been exposed by the pandemic. 

The call comes as the union body publishes new polling which shows how low-income workers have borne the brunt of the pandemic with little or no option to work from home, no or low sick pay and reduced living standards, while better-off workers have enjoyed greater flexibility with work, financial stability and increased spending power.  

Pandemic class divide 

New TUC polling, conducted by Britain Thinks, has revealed the extent of the pandemic class divide with the high-paid more financially comfortable than before, while the low-paid have been thrust into financial difficulty: 

  • Low-paid workers (those earning less than £15,000) are almost twice as likely as high-paid workers (those earning more than £50,000) to say they have cut back on spending since the pandemic began (28 per cent compared to 16 per cent) 
  • High earners are more than three times likely than low-paid workers to expect to receive a pay rise in the next 12 months (37 per cent compared to 12 per cent). 

This Covid class divide isn’t just apparent on personal finances. The polling also shows how low-paid workers are markedly more likely to get low or no sick pay compared to higher earners: 

  • Low-paid workers are four times more likely than high-paid workers to say they cannot afford to take time off work when sick (24 per cent compared to six per cent). 
  • Only a third (35 per cent) of low-paid workers say they get full pay when off sick compared to an overwhelming majority of high-paid workers (80 per cent) 

The TUC has long been calling for an increase to statutory sick pay, which stands at a derisory £96.35 a week, and from which more than two million low-paid workers – mostly women – are currently excluded because they do not earn enough to qualify.  

The union body recently criticised the government decision to “abandon” these two million workers by failing to expand eligibility of sick pay, as they had previously promised. 

This lack of decent sick pay is compounded by the fact that low-paid workers are more than three times more likely than high-paid workers to say they their job means they can only work outside the home (74 per cent compared to 20 per cent).  

This means that low-paid workers face greater risk of contracting the virus at work, and when ill, often face the impossible choice of doing the right thing but losing income or keeping full pay but potentially spreading the virus. 

Low-paid industries lag 

New TUC analysis shows that the three industries furthest away from a jobs recovery – arts and entertainment, accommodation and food and ‘other services’ – are all ‘low paid’ industries.  

These are also the three industries with the highest furlough rates according to HMRC stats, and three of the highest according to most recent ONS estimate.  

The end of furlough poses a serious threat to low-paid jobs in these industries – and combined with the “senseless” Universal Credit cut – will be a hammer blow for low-paid workers and push many further into hardship, the union body says. 

Time for an economic reset 

The TUC says its analysis and poll findings paint a picture of stark inequality in the UK, which has been further entrenched through the coronavirus crisis, and show that the country needs an urgent “economic reset” post-pandemic. 

The union body warns that without such a reset, the government’s levelling up agenda will be “doomed to failure” as ministers risk repeating the same mistakes which followed the financial crisis, allowing insecure work to spiral even further. 

To prevent unnecessary hardship in the coming months, the TUC is calling on the government to: 

  • Extend the furlough scheme for as long as is needed to protect jobs and livelihoods and put in place a permanent short-time working scheme to protect workers at times of economic change 
  • Cancel the planned £20 cut to Universal Credit 

And as part of a post-pandemic reset, the TUC says ministers must: 

  • Ban zero hours contracts 
  • Raise the minimum wage immediately to at least £10 
  • Increase statutory sick pay to a real Living Wage and make it available to all 
  • Introduce new rights for workers to bargain for better pay and conditions through their unions  

TUC General Secretary Frances O’Grady said: “Everyone deserves dignity at work and a job they can build a life on. But too many working people – often key workers – are struggling to pay the bills and put food on the table.  

“It has been a tale of two pandemics. This Covid class divide has seen low-paid workers bear the brunt of the pandemic, while the better off have enjoyed greater financial security, often getting richer. 

“This should be a wake up call – we need an economic reset. It’s time for a new age of dignity and security at work. 

“Without fundamental change, the government’s own levelling up agenda will be doomed to failure. And we risk repeating the same old mistakes of the past decade – allowing insecure work to spiral even further. 

“Ministers must start by banning zero-hours contracts, raising the minimum wage with immediate effect and increasing statutory sick pay to a real Living Wage, making it available to all.  

“And we know that the best way for workers to win better pay and conditions at work is through their union.” 

On the risk to low-paid workers this autumn, Frances said:  “The imminent end to the furlough scheme and cut to Universal Credit this autumn will be a hammer blow for low-paid workers and could plunge millions into hardship, many of whom are already teetering on the edge. 

“The government must reverse its senseless decision to cut Universal Credit and extend the furlough scheme for as long as is needed to protect jobs and livelihoods.”