The highly anticipated sick leave legislation has recently been passed by the Oireachtas, meaning that for the first time employees in Ireland will have a legal right to sick leave paid by their employer.

The implementation date, confirming when employers need to start providing paid sick leave remains to be confirmed, but this is expected to be fairly imminent.

The entitlement will start at three days' paid sick leave in 2022, increasing incrementally, with the intention that employers will cover five days in 2023, seven days in 2024 and eventually 10 days in 2026.

This phasing in of sick pay is intended to take account of the current economic climate and the existing financial pressures on businesses, and this will be monitored as the scheme progresses.

The rate of sick pay is set at 70pc of an employee's wage, subject to a daily maximum of €110. This threshold may be reviewed and amended over time in line with changes in income or inflation.

"Up until now, Ireland has been an outlier in Europe"

Employees have to provide a medical certificate to qualify for statutory sick pay and the entitlement is subject to the employee having worked for their employer for a minimum of 13 weeks.

There is no waiting period so, unlike the current social welfare regime, employees are entitled to sick pay from the first day of absence.

What do employers need to do?

The statutory scheme aims to provide minimum protection; indeed, many employers will already provide sick pay to their employees over and above the statutory entitlement.

Where this is the case, employers should update their contracts and policies to provide that contractual sick pay is inclusive of statutory sick pay.

In any event, employers should consider reviewing their policies and contracts to ensure they comply with the scheme.

Employers who don't already pay sick pay will need to ensure appropriate processes and systems are in place to administer payment during sick leave and to maintain records (which must be kept for four years).

An employee must submit a medical certificate signed by a registered medical practitioner, even where they are only off sick for one day. Many sick pay policies don't require a medical certificate for the first three days of absence so employers may wish to update their policies accordingly.

The employee bears the cost of obtaining a medical certificate which could, in practice, amount to a considerable cost for them, particularly where they take one day's sick leave on numerous separate occasions throughout the course of the year (as they will be required to provide a medical certificate for each absence).

Employers who already pay sick pay to employees might therefore retain their policy around medical certificates to reduce the financial burden on employees.

However, given that the purpose of the scheme is to provide protection to employees in low-paid and precarious employment, who are less likely to be entitled to company sick pay, this could diminish the value of the scheme to the very employees the scheme is intended to protect.

This consequence has been acknowledged by the Government and may be addressed in some way as the scheme progresses.

Impact on employment

Statutory sick pay is the latest in a series of actions taken by the Government aimed at improving social protections for employees in Ireland, following benefits including paternity leave, parental leave and treatment benefit.

Up until now, Ireland has been an outlier in Europe as almost all European countries require employers to pay some level of sick pay to their employees by law. In the UK, statutory sick pay has been in place for many years; it is paid by the employer to eligible employees from the fourth consecutive day of sickness absence, up to a maximum of 28 weeks.

While sick pay has been on the political agenda for a while, the Covid-19 pandemic was undoubtedly the catalyst for the Government introducing draft legislation in 2021.

The issue became particularly pressing when workers were told to stay out of work for two weeks if they had symptoms of Covid-19, or were identified as a close contact, with no legal right to sick pay.

In some cases, employees who could not work from home hid their symptoms or close contact status to avoid having to take unpaid time off work.

Among other benefits, mandatory sick pay schemes are reported to result in employees feeling less pressurised to come into work when they are unwell. This promotes a safer work environment, resulting in less productivity loss overall.

Interestingly, there is Organisation for Economic Cooperation and Development research which suggests that increasing the responsibility of employers in relation to sick pay could actually improve absence rates, by encouraging employers to engage more directly in the management of sick leave and incentivising them to engage in preventative measures and return-to-work planning with their employees.

Impact on employers

The Government has said that the statutory sick pay scheme is not intended to impose significant costs on employers. However, it acknowledges that the scheme represents a fundamental change in how payment for illness-related absences is dealt with in Ireland and therefore, some additional costs for employers are inevitable.

There are two primary costs associated with implementing the sick pay scheme: the payroll costs of paying an employee who is on sick leave and the administrative costs in relation to setting up and implementing the scheme and maintaining records for each.

These costs will be felt most by small employers who are less likely to have a sick pay scheme in place.

Under the legislation, the Labour Court may grant an exemption to employers who are experiencing severe financial difficulties but this is subject to a number of conditions being met.

If an employee believes their employer has failed to comply with the legislation, they can bring a claim to the Workplace Relations Commission and the maximum compensation they can be awarded is four weeks' remuneration.

A fine can also be imposed on an employer who fails to keep adequate records of statutory sick leave.

There will inevitably be some teething issues, so we may also see some fine tuning as the scheme plays out in practice.

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