How day one sick pay will change hiring behaviour
Few employers disagree with the objectives of day one sick pay, but there could be adverse impacts on hiring behaviour, writes George Reed
The government’s proposal to introduce Statutory Sick Pay from the first day of illness has been framed as a modest, technical adjustment to the existing system. In isolation, it might appear exactly that. In practice, however, day one sick pay represents a meaningful shift in how employment risk is distributed, and businesses are already responding accordingly.
Under the current framework, Statutory Sick Pay becomes payable from day four of absence. The proposed reform would move that obligation to day one, while also removing the Lower Earnings Limit, extending eligibility to millions of lower-paid and part-time workers. The intent is clear. Greater protection, earlier support and fewer gaps in coverage. Few employers would disagree with those objectives.
The issue is not the principle. It is the cumulative impact.
These changes sit alongside a broader programme of employment reform, including expanded family and parental leave rights, tighter redundancy protections, pressure on an already stretched employment tribunal system and proposals to revisit unfair dismissal compensation later in the parliament. Taken together, these changes represent a structural increase in the cost and risk of permanent employment, particularly from the very start of the employment relationship.
From a business perspective, that matters. Risk introduced at day one influences behaviour at day zero.
Employers make hiring decisions based on cost, productivity, compliance and exposure. When sickness absence carries a financial and administrative cost from the first day, before productivity has been established and before probation has meaningfully progressed, the calculus changes.
Businesses are adapting to new employee rights
We are already seeing businesses adjust. Probation periods are being extended. Permanent recruitment decisions are taking longer. Greater emphasis is being placed on absence management processes, documentation and compliance infrastructure. For larger organisations, that often means investment in systems and specialist support. For small and mid-sized businesses, it can mean management time being diverted away from growth and into administration.
None of this suggests employers are seeking to avoid responsibility. Most recognise that sickness absence is a reality of working life and that workers need protection. But they are responding rationally to incentives and risk.
One likely behavioural outcome is an acceleration of an existing trend towards more flexible workforce models. Permanent employment will remain critical, but it will not always be the default choice for every role, project or demand spike. As employment risk increases from the outset, more organisations will look to temporary, interim and contract arrangements to access skills while managing long-term exposure.
When structured properly, these models can be compliant, transparent and fair to workers. They change where risk is placed. That is why demand for them grows when the cost of permanent employment rises.
This is where policy intent and real-world impact can diverge. The risk is not necessarily fewer jobs. It is different jobs. Businesses become more cautious about when and how they commit to permanent headcount, particularly in people-intensive or project-led environments where margins are tight and absence levels are harder to absorb.
Smaller employers, who account for a significant proportion of job creation, feel these changes most acutely. They have less capacity to absorb cost shocks and fewer internal resources to manage complex compliance requirements.
If the aim is to improve worker security without slowing growth or reducing opportunity, implementation matters. Clear, practical guidance will be essential, particularly for smaller employers navigating multiple reforms simultaneously. Targeted support, rather than one-size-fits-all messaging, would help reduce uncertainty and build confidence.
These reforms will need to be reviewed after the first year. Measuring the impact on hiring behaviour, absence patterns and labour market flexibility would allow policymakers to understand whether the balance between protection and practicality has been struck in the right place.
Good employment policy works when it acknowledges how businesses actually behave. Employers respond to incentives, risk and cost. Day one sick pay will change those dynamics from the moment someone starts work. That should not surprise anyone. The challenge is ensuring the outcomes match the intent.
George Reed is founder and managing director of international HR services company Oberon Solutions