TUC Says Sick Pay Reforms Could Add £2 Billion to UK Business Productivity

As the UK debates a transformative Employment Rights Bill in the House of Lords, a new analysis commissioned by the Trades Union Congress (TUC) suggests that far from harming business, expanded sick pay could generate up to £2 billion in net benefits for UK employers.

While employer groups warn the legislation could increase costs and hinder hiring, the TUC’s findings argue the opposite: early sick pay access could reduce long-term absences, improve morale, and drive retention, all while preventing the spread of illnesses that tank productivity.

Let’s break down the numbers, the policy, and what it means for CEOs, HR departments, and the bottom line.

The Status Quo: UK’s Lagging Sick Pay Model

Under current UK law, statutory sick pay (SSP) only kicks in from the fourth day of illness, leaving many workers—particularly low-paid and part-time employees—vulnerable. SSP is currently capped at £118.75 per week, or about £3 per hour, and individuals earning under £125 a week aren’t eligible at all.

This system means:

1.3 million low-paid workers receive no sick pay at all
Many workers delay taking time off, fearing financial hardship
Ill employees often come into work sick, risking wider outbreaks and workplace disruption

Proposed Reforms: Early Access, Broader Coverage

The Employment Rights Bill, championed by Deputy Prime Minister Angela Rayner, aims to:

Abolish the 3-day wait period for SSP, making it accessible from day one
Remove the minimum earnings threshold, extending protection to all working individuals
Introduce other pro-worker reforms, including:
- Ban on fire-and-rehire
- Flexible work rights
- Unfair dismissal protection from day one

These reforms have sparked pushback from business groups like the Federation of Small Businesses, who argue the new rules could increase costs and discourage hiring—especially in fragile economic conditions.

The TUC’s Economic Case: £2.4B in Gains vs. £425M in Costs

The TUC, working with consultancy WPI Economics, counters that the reforms are not just moral—they’re profitable. Their modelling forecasts:

£2.4 billion in productivity gains through reduced sickness spread, improved morale, and retention
Only £425 million in direct sick pay costs for employers
A net benefit to British firms of nearly £2 billion

Why It Pays Off:

Prevention is cheaper than cure: Paying for one day off now avoids a two-week absence later
Infectious diseases (colds, flu, Covid) won’t sweep through offices when sick workers stay home
Employee trust and morale improve when health is prioritized
Retention and recruitment improve when firms are seen as supportive

WPI’s modelling leans on a 2018 US study showing that accessible sick pay actually lowers total sick leave, because fewer people fall ill overall.

Business Resistance: Costs, Abuse Concerns, and Hiring Risks

Despite the TUC’s optimistic modelling, business lobby groups remain wary. The Federation of Small Businesses (FSB) has warned that:

“Changes to statutory sick pay will make employers think twice about their hiring plans.”

Key concerns include:

Abuse of the policy (i.e. people taking unnecessary sick leave)
Pressure on small businesses with fewer cash reserves
Rising HR and payroll compliance costs

While these concerns are valid, the TUC argues that many of these risks are exaggerated and that a properly structured system—with doctor verification and digital reporting—can balance fairness with accountability.

Paul Nowak: “This Is a Win-Win for Workers and Businesses”

TUC General Secretary Paul Nowak emphasized the broader societal and economic impact:

“Nobody should be plunged into hardship when they become ill…
With sick pay rights from day one, workers can recover properly and return healthier and more productive.”

Nowak added that the UK’s current sick pay is “among the worst in Europe” and falls far short of international peers like Sweden, which pays 80% of salary during sick leave.

The TUC is also calling for a raise in SSP rates, describing the current £118.75 per week as “inadequate for modern living costs.”

Reframing Sick Pay as a Strategic Investment

For business leaders, the debate is about more than immediate cost. It’s about workforce resilience, employer branding, and long-term profitability.

Key considerations:

Do you want sick employees in the workplace?
How much does low morale cost you in lost productivity or staff churn?
Would stronger health policies reduce burnout and improve engagement?

Companies that get ahead of policy shifts and voluntarily align with best practices in sick pay will likely see faster recruitment, better retention, and a more loyal workforce—critical in a post-pandemic era where employee wellbeing is now a bottom-line factor.

What Happens Next?

The bill is currently being debated in the House of Lords, with a vote expected in the coming weeks. If passed, it will:

Trigger operational and payroll adjustments across businesses
Require HR policy updates and employee handbook changes
Set a precedent for further pro-worker legislation

A Healthier Workforce Is a Competitive Edge

The UK stands at a crossroads. Will it remain one of the stingiest developed nations on sick pay, or finally embrace a system that protects workers without penalizing business?

The TUC believes the choice is clear—and potentially worth £2 billion in economic upside.

For CEOs, CFOs, and HR leads, this reform isn’t just a compliance issue. It’s a strategic decision about the kind of workplace culture you want to lead—and the kind of company you want to build.