As the commencement of the much-anticipated Sick Leave Act 2022 (“the Act”) is just around the corner, employers have lots of queries about the practical impact and the new legal obligations under the Act.
From 1st January 2023, all employers in Ireland will become obliged to make minimum mandatory sick payments to their employees. Whilst many employers may already have a company sick pay scheme in place, those existing schemes need to be examined to ensure that employers are meeting their new statutory obligations and the new obligations will also place a new burden on employers who have not previously provided for contractual sick pay.
Here is a summary of main provisions of the Act:
- Employees will be entitled to sick pay for up to 3 sick days per year. This is set to increase to 5 days in 2024, 7 days in 2025 and 10 days in 2026, although that is not provided for under the Act and the Act provides that the 3 day entitlement must be in place for at least one year after commencement of the Act on 1st January next.
- To avail of the statutory payment, the employee must provide their employer with medical certification from a GP stating they are unable to work.
- Employees must have been working for their employer at least 13 weeks to become eligible for the payment.
- Subject to complying with these requirements, the statutory entitlement will be triggered on the first day of the employee’s sick leave.
What is the rate of statutory sick pay to which an eligible employee will be entitled?
An employee who meets the requirements will be entitled to statutory sick pay of 70% of their normal wages up to a maximum of €110 per day. Regulations under the Act provide that the calculation of an employee’s normal wages includes any regular bonus or allowance, the amount of which does not vary in relation to the work done by the employee, but does not include any pay for overtime or commission.
The Act provides a limited exception for employers who are experiencing severe financial difficulties within their business. Where that is the case, an employer, or its representative, may apply to the Labour Court for an exemption of their obligation to provide statutory sick pay to their employees. If granted, subject to satisfying certain conditions as set out in the Act, the exemption will apply for a minimum of three months up to a maximum of one year.
How will the social welfare Illness Benefit system underpin the new sick pay legislation?
It is important to note that it is the employer and not the State who is obliged to provide sick pay to eligible employees under the Act. If an employee has already received their maximum statutory sick pay entitlement from their employer, but is absent from work due to illness or injury for a period exceeding the maximum entitlement under the Act, the employee may be eligible to qualify for Illness Benefit from the Department of Social Protection, subject to meeting the required PRSI contributions.
Our company already operates a contractual sick pay scheme which provides for two paid sick days per year. Are we obliged to amend our scheme to increase the number of paid sick days for employees in line with the Act?
An employer’s contractual sick pay scheme can act in tandem with the statutory sick pay entitlement so long as it is not deemed to be less favourable than the entitlements in the Act in respect of the following:
- the period of service that is required of an employee before sick leave is payable,
- the number of days that an employee is absent before sick leave is payable,
- the period for which sick leave is payable,
- the amount of sick leave that is payable, and
- the reference period of the sick leave scheme.
The Act will override any less favourable treatment in a company sick pay scheme.
Where employers currently offer fewer paid sick days than the minimum number of paid sick days provided for in the Act, (3 days for 2023), employers should amend their policy to clarify that their company sick pay scheme applies, and any sick days taken by an employee in excess of the company sick pay scheme will be treated in accordance with the terms of the Act. Employers should ensure that their method of calculating their contractual sick pay is at a minimum in line with the Regulations under the Act.
Our company already operates a contractual sick pay scheme which is more generous than the entitlements contained in the Act. An employee must, however, have six months’ service before they are entitled to avail of it. Can we refuse to provide sick pay to an employee who has not reached the six-month service requirement under the terms of our contractual scheme?
Under the Act, an employee’s entitlement to paid sick leave will have accrued once they have 13 weeks’ service. That is the case even where an employer operates a more favourable company sick pay scheme which does not kick in until a longer service requirement has been met. Where an employee has 13 weeks’ service, they will be able to rely on their statutory entitlement under the Act until their contractual entitlement kicks in. An employer cannot refuse to provide statutory sick pay to an employee who has 13 weeks’ service but who has not yet met the service requirement for their contractual sick pay scheme. If an employer has a contractual sick pay scheme in place which exceeds the entitlements contained in the Act, their scheme should reference the fact that payment of contractual sick pay is inclusive of their statutory obligations.
Employees are entitled to lodge a complaint to the Workplace Relations (“WRC”) if their employer refuses to discharge statutory sick pay. The WRC can make a maximum award of four weeks remuneration. Employers are obliged to retain records of statutory sick pay for four years. Failure to comply with the record-keeping requirement may result in a fine of up to €2,500.
Is an employee entitled to statutory sick leave payment during their probationary period?
Once the employee has satisfied the 13-weeks service requirement, they become entitled to paid statutory sick leave, even if that occurs during the employee’s probationary period. However, the Act does provide that, if an employer considers that the employee’s absence from employment whilst on statutory sick leave would not be consistent with the continuance of the probation, the employer can suspend the period of probation during the period that the employee is absent on sick leave and require that the employee complete that time at the end of the probationary period. The same applies for periods of training or apprenticeship. Carefully drafted probationary clauses are key in employment contracts.
Our company’s contractual sick pay scheme provides for two ‘waiting days’ before they become entitled to illness benefit. Is this permitted under the Act?
It is not unusual for a contractual sick pay scheme to provide that an employee only becomes eligible for sick pay on, for instance, their third day of absence. The Act, however, has been drafted to ensure that 'waiting days' will not apply to statutory sick pay. Employers may therefore be required to adjust their scheme to address this difference. At a minimum for 2023, ‘waiting days’ cannot apply to the 3 days of an employee’s statutory sick pay but an employer could impose ‘waiting days’ for any sick days taken in excess of the statutory allowance, in line with their contractual scheme.
Are statutory sick pay entitlements pro-rated for part-time employees?
The Act defines ‘employee’ as a person who has entered into or works under a contract of employment. It does not distinguish between full-time and part-time employees. Therefore, once any employee has met the requirements under the Act, they become entitled to paid statutory sick leave, whether they work on a full-time basis or not. It should be noted that the Act also applies to agency workers and, in that instance, the employer is the agency and not the end-user organisation. The Act therefore places no obligation on companies to pay statutory sick pay to workers who are not their employees.
If an employee leaves the company within the same year after first taking statutory sick leave in that year, can an amount of the statutory payment be clawed back on a pro-rated basis?
The Act does not provide for any form of pro-rating of statutory sick leave days. Once an employee meets the requirements under the Act entitling them to statutory sick leave payment, they are entitled to use them if they are incapable of working due to illness or injury, whether or not they leave their employment shortly thereafter. An employer therefore cannot claw back any amount that may have been paid to an employee under the statutory scheme.
Conclusion
Whilst a welcome development for employees, particularly those on lower wages, it remains to be seen whether those employees will avail of the statutory sick payments for short absences given the cost they will incur in obtaining a medical certificate to avail of the statutory payment.
We recommend that all employers review their employment contracts and handbook/policies to ensure that their contractual sick pay scheme meets the minimum requirements of the legislation. Employers with no sick pay scheme in place will need to implement a scheme which aligns with the Act. Employers will also need to consider putting measures in place to trigger the incremental increases in the coming years.
Employers should engage with payroll to ensure the appropriate systems are in place to comply with their sick pay obligations and that adequate records are kept of those payments.
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