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31st January, 2022

Company Sick Pay Cuts and Covid-19

person holding a lateral flow test

Recent weeks have seen a relaxation in the self-isolation rules across England and Wales. People with Covid-19 (regardless of vaccination status) can now end their self-isolation after five full days, provided they test negative on day five and six and do not have a temperature.

The rules for vaccinated and unvaccinated people differ in relation to “close contacts”. Currently, in both England and Wales, if a vaccinated person is identified as a “close contact” of someone with Covid-19, they are not legally required to self-isolate (albeit they should take daily lateral flow tests for seven days). In contrast, unvaccinated close contacts are legally required to self-isolate for ten days following last contact with the positive person.

Employees who refuse to be vaccinated are consequently more at risk of having to self-isolate for longer, potentially resulting in increased sickness absence if such employees are unable to work from home. As a result, some well-known employers (including Aldi, Morrisons and Next) have recently taken the decision to reduce enhanced sick pay for employees who are unvaccinated and are forced to self-isolate if they have been in “close contact” with someone with Covid-19. It is worth noting though, most employers introducing such a policy, are not extending it to cover unvaccinated employees who contract Covid-19.

If employers are considering limiting the scope of enhanced sick pay, the starting point is to check whether such pay is contractual or discretionary. If an enhanced sick pay scheme is labelled as discretionary, employers may have more scope to withhold sick pay from those who are self-isolating, due to being in “close contact”. However, even if enhanced sick pay is discretionary, employers still should consider whether there is any custom and practice of paying contractual sick pay and whether failing to do so could be a breach of an implied contract.

However, many sick pay schemes are contractual and do not usually distinguish between different types of illness or the circumstances in which the illness has been contracted. Where terms are contractual, as things stand it is unlikely that an employer could legally withhold enhanced sick pay from an employee (regardless of vaccination status) who has contracted Covid-19.

Although the employer’s logic seems understandable, making changes to sick pay entitlements, whether contractual or discretionary, is not without risk. Don’t forget too that an employee may be unable to be vaccinated for medical reasons, or they may refuse to be vaccinated based on religious or philosophical beliefs or because of pregnancy. These situations could give rise to discrimination claims under the Equality Act 2010.

We therefore suggest that employers do not apply a blanket approach to reducing enhanced sick pay in response to Covid-19. We recommend that employers review matters on a case-by-case basis and consider any individual mitigating circumstances, as appropriate.

Disclaimer: the information in this article is up-to-date as of 28 January 2022.

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