EU sick pay rules hammering small business

The FSB says sick pay rules are preventing small firms from hiring staff. Are fit notes the answer?

Last Updated: 31 Aug 2010

Red tape never goes down well with small business owners at the best of times, but particularly not when it’s European red tape that costs them money. Hence why SME owners are up in arms about a recent European Court of Justice ruling on the Working Time Directive, which concluded that staff on long-term sick should still be entitled to paid annual leave. According to the Federation of Small Businesses, almost three-quarters reckon this will affect their hiring decisions – not ideal at a time when jobs are already few and far between. But unless UKIP springs a shock by winning the Election, it’s unlikely that the law’s going to change any time soon. So maybe the new fit notes are our best hope…

The Working Time Directive hasn’t exactly been welcomed with open arms by UK plc, but it recently got even more burdensome. In the case of Stringer vs HMRC, the ECJ ruled that statutory holiday entitlement continues to accrue during sick leave – so even if an employee is off sick for an entire leave year, employers must let them take their full holiday entitlement when they get back (even if that’s the following year), or pay them the equivalent if their employment terminates. That basically overruled the UK legal position that holiday couldn’t be carried forward. So it could have expensive implications for businesses, and small firms obviously feel this most sharply.

So it’s no wonder that the FSB’s latest research found that small firms are, well, sick about it. 38% said they’d be less likely to take on new staff with health problems, 21% said they’d be less likely to take on any new staff at all, and another 17% said they’d be more likely to get rid of staff on long-term sick. Another 54% bemoaned the negative impact of another recent Euro ruling, which allows staff to convert annual leave into sick leave if they get ill when they’re supposed to be on holiday. This might seem fair enough on the surface. But it’s obviously an extra burden for small firms.

But what can they do about it? Well, the FSB is urging the European Commission to think again, but we'll believe that when we see it. So, short of pulling out of Europe altogether (and we’d need a very large and very sudden swing to UKIP for that to happen), perhaps the best bet is to try and cut down long-term sickness absence. And that’s where fit notes come in: the hope is that by focusing on what employees can do, rather than what they can’t, sick staff can be back in the workplace more quickly. It won’t solve the problem entirely, but hopefully it will at least mitigate it.

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EU sick pay rules hammering small business

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