January 28, 2017    6 minute read

Paid Absence: A UK-Europe Comparison

The Brexit Diagnosis    January 28, 2017    6 minute read

Paid Absence: A UK-Europe Comparison

Since the results of last summer’s referendum, there have been a great many dire predictions about the likely impact of Brexit on human resources (HR) policy – and in particular on workers’ rights, if some of the frequently cited ‘worst case scenarios’ do indeed come to pass.

While the finer details of any deal will, of course, take a great deal of hammering out before becoming clear, some commentators have suggested that the UK look to the US for a possible indication of the sorts of outcomes one might expect if and when the ball does really start rolling on a full UK withdrawal from the EU.

In particular, full-time employees’ current entitlement to paid leave – currently set at a minimum of 20 days annually, per EU law – is something that many have suggested might be at risk. US workers, far removed from the benefits of such legislation, aren’t automatically entitled to any paid leave as it stands.

The Poorly State of Paid Leave

One interesting point to bear in mind, however, is that Europe itself already operates under an incredibly muddled approach to the idea of paid leave, particularly where sick pay is concerned.

Research recently compiled by Vouchercloud produced a series of revealing infographics showing a huge disparity in standards of entitlement from country to country. What’s particularly interesting is that these national statutory minimums (for statutory sick pay, or SSPs) don’t necessarily correlate with the different countries’ relative economic strengths or average income levels at all. Moreover, they show that several nations known for having typically more robust economies – the UK being a notable example – already place well down the European league rankings in terms of existing sick pay entitlements for employees.

9% UK sick pay as a proportion of weekly wages

Indeed, the data indicates that an average UK worker can expect to receive just 9% of a typical weekly salary during a five-day absence period. This compares extremely poorly with various other countries such as Switzerland, where citizens would typically expect a full weekly paycheque for a week off, despite Switzerland also paying much higher average wages than the UK.

Similarly, in Liechtenstein – where wages are in fact the highest in Europe, thanks to its unique economy and high GDP– average sick leave entitlement for a week of absence comes in at around 64% of a full salary. This falls broadly in line with the current Europe-wide average of around 65%.

Pay Problems: A Diagnosis

There are numerous reasons for this. One key factor highlighted by the data is that the UK, like several other EU countries, imposes an initial ‘qualifying period’ for sick leave – typically three days, but sometimes longer – during which no money is paid at all.

This obviously has a more noticeable impact on shorter periods of absence than longer ones. Although even in longer-term scenarios, several fairly resilient economies (the UK, France, Ireland, and Finland in particular) still lag some distance behind the European average.

Much of this variation can be attributed to wildly different national policies regarding government underwriting of absentee entitlements: Norwegian workers are effectively paid directly by the state for periods of absence between sixteen days and one year, while compensation in Luxembourg becomes supported by its National Health Fund after 76 days.

51% of Britons assume they receive full wages during illness

The key point here is that very few people actually have quite as clear an idea of their existing entitlements as they probably think they do. A survey by UK nonpartisan think tank Demos, for example, found that 51% of British respondents believed they would automatically receive full wages during a week off with illness, rather than the much smaller 9.6% entitlement they’re actually guaranteed according to an average of current statutory minimums.

Perhaps this sort of misconception is one of the reasons why British workers still claim among the highest rates of sick leave in Europe, at an average of over nine days per year?

Sick Pay, Abroad and in the Future

The data used in Vouchercloud’s research deals strictly with SSP or other national minimum equivalents, the majority of which are set by national governments. In the UK, these tend to form the entirety of most compensation packages, although there’s nothing to stop individual businesses from further tweaking their offers – either by raising sick leave pay levels above statutory minimums or running additional schemes of their own devising to improve the overall deal.

It remains to be seen whether or not SSPs will survive Brexit in anything like the form they hold for the time being. But if an eventual uncoupling from EU law does leave the UK with a more American-style compensation landscape, then it goes without saying that these sorts of individually-tailored packages might come far more heavily into play when trying to attract and keep a workforce.

That said, numerous places in the US, including New York, ­have implemented legally protected sick leave schemes over the past year or two, and the overall impact on companies appears to be far less dramatic than many feared. While it would seem logical to assume that annual payouts to absent employees necessarily constitute an immediate loss, findings published at the tail end of 2016 by the US Center for Economic and Policy Research suggest otherwise, meaning that America could well be headed more towards a European-style system in the not-too-distant future.

In the meantime, it would seem prudent for UK companies to remain aware of their own potential capacities in this regard, and to keep a close eye on whether or not Brexit might force a detailed rethink of what is currently a relatively straightforward administrative process further down the line.

Business Wisens Up to Reality

One thing above all does remain fairly clear, at least statistically: a 2015 Bloomberg piece examining some of the most common objections to the provision of paid sick leave noted that most available data does seem to support the notion that the overall cost to employers is generally fairly minimal.

It’s looking increasingly important that companies both in Europe and beyond catch up with this theory, too – with numerous global tech giants including Facebook and Microsoft announcing in the past 24 months that they would only engage contractors and suppliers that offer paid sick leave, businesses are going to face mounting pressure to deliver.

Indeed, Microsoft VP Brad Smith blogged about the issue back in 2015, echoing claims that a reasonable sick leave policy was a good business practice, which led to “happier and more productive” staff as well as helping to sustain overall productivity by avoiding the spread of contagious illness around workplaces.

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