It's An Ill Wind
...As Blows Nobody Any Good
There was a harsh chill in the air with the start of 2014's tax year, and it could mean more than a nasty case of businessman-flu if you're not prepared for its effects. There's been a change in the way HMRC handles Statutory Sick Pay, and small businesses across the country are already feeling their temperatures rising over it.
Until recently, business owners have been required to pay Statutory Sick Pay to their employees (providing they qualify to receive it) at a rate of £87.55 per week for up to 28 weeks. You've been able to offer more than this via your own company scheme, but the basic minimum is set in law. Statutory Sick Pay is paid the same way as normal wages, and is subject to tax and National Insurance as usual. There are different rules for certain types of employees (such as agency workers, Directors and education workers), but the principle is generally the same.
The wrinkle in this is that the bite of those payments have previously been softened by the fact that employers could claim back a proportion of them from HMRC. Before 2014, the Percentage Threshold Scheme meant that employers were compensated if a large proportion of their workforce became ill at the same time. If the Statutory Sick Pay payments they made amounted to over 13% of their Class 1 National Insurance contributions for a given month, they could claim back the difference. In the case of small businesses, this could actually be a significant help.
As of the 5th of April 2014, that scheme ceased to exist, and employers have been told they have to foot their entire Sick Pay bills themselves. The government explained that they abolished it to fund a new Health and Work Service.
Advice on the government's own site explains how employers may still be able to reclaim part of their Statutory Sick Pay costs from previous tax years, and HMRC will step in and make the payment for any employee who was sick when the company they worked for became insolvent. Of course, that's probably not much comfort for many businesses who hadn't been aware of or prepared for the changes.
At RIFT Accounting, we often talk about being there to spot the rough waters ahead, and this is precisely the kind of situation we mean. Seeing a hazard or setback coming in time to adjust your course is so much better than bailing out frantically after you've already hit the iceberg.
With RIFT as your lighthouse and lifeguard, you'll always know you've got the brightest beacon in the business guiding you.