Reducing Sick Pay For Unvaccinated Staff

The majority of employers are looking for new ways to try and best manage the impact of the pandemic upon their business. Having had to ride the wave of Covid-19 for almost two years now, businesses have been forced to assess their ongoing economic viability and are having to keep their financial position under close review.

As part of that, many employers are seeking to reduce business costs associated with the pandemic. One of those obvious costs is the cost of sick pay for those who are off sick with Covid-19, or self-isolating because they have Covid-19, or have been in close contact with someone that has the virus.

With infection rates still fairly high and instances of self-isolation amongst workforces, the total costs of sick pay are potentially becoming prohibitive for many businesses.

Companies cut sick pay for unvaccinated staff forced to self-isolate

IKEA and Next have announced that they are joining the growing list of employers (including Morrisons and Wessex Water) who are opting to reduce employee’s sick pay entitlement to statutory sick pay only, where an employee is self-isolating because they either have Covid-19 or have been in close contact of someone that has Covid-19 and have opted not to be vaccinated against Covid-19.

This has proved to be an emotive topic and one which has caused great debate from both a moral and legal perspective.

However, after these retailers opted to reduce employees’ sick pay entitlement, retailer John Lewis announced that all its staff are entitled to full sick pay for Covid-related absences, regardless of vaccination status, and it would not be “right” to differentiate. Operations director Andrew Murphy said he “cast no judgement” and the firm was “not going to make any change of this type.”

Other retailers, including Sainsbury’s, Tesco, and Asda, have all said that they will continue to pay unvaccinated workers full company sick pay when they are isolating.

Can employers reduce sick pay for unvaccinated staff?

Whilst employers can reduce sick pay for unvaccinated employees, in theory, this does give rise to a number of potential legal issues. We explore some of the risks that ought to be borne in mind by employers when considering whether to reduce sick pay entitlement and/or implement a policy of not paying company sick pay to unvaccinated employees in the context of Covid-19 below.

Discrimination

As a general rule, employers considering reducing unvaccinated employees’ sick pay entitlement will need to approach each instance of this in practice on a case-by-case basis.

Reducing sick pay entitlement for those who are unvaccinated could well have the effect of disproportionately impacting certain groups of the workforce, giving rise to potential discrimination claims.

Current legislation and guidance require individuals to self-isolate in a number of scenarios. However, the requirement to self-isolate has been significantly relaxed for those who are vaccinated against Covid-19 in recent months. For example, individuals who are vaccinated are not necessarily required to self-isolate if they live in the same household as someone with Covid-19 (i.e. someone with symptoms or who has tested positive or has been in close contact with someone with the virus).

Meanwhile, individuals who have exercised their right not to be vaccinated have to self-isolate for a full 10-day period if they live in the same household or are in close contact with someone with Covid-19.

It is recognised that both vaccinated and unvaccinated individuals can release themselves from self-isolation after seven full days if they have two negative rapid lateral flow tests (and after five full days with effect from Monday, 17 January 2022). However, this only applies in cases where self-isolation is required because that individual has tested positive for Covid-19.

The requirements remain different in instances where an individual lives in the same household as or is in close contact with someone with Covid-19 (as described above). It follows that unvaccinated employees have a higher chance of being required to self-isolate and are impacted by a reduction in sick pay entitlement. Employees may opt not to be vaccinated because of health reasons (for example, they are clinically exempt owing to a condition that could amount to a disability under the Equality Act 2010), or because they are pregnant, or because of their religious or philosophical beliefs. Research has also shown that statistically those from BAME communities are more likely to show vaccine hesitancy or refuse to be vaccinated (see in our previous blog).

As a result, not paying company sick pay to those who are unvaccinated in instances of self-isolation (particularly where this has previously been paid) could well amount to indirect discrimination on grounds of age, disability, pregnancy, belief, or race.

Employers opting to go down this route would need to take into account any mitigating circumstances and be aware of the fact that it may be necessary to recognise and maintain existing sick pay entitlement in certain cases.

Employee relations

Whilst reducing sick pay for unvaccinated employees could encourage the workforce to get vaccinated, doing so could be damaging from an employee relations perspective, particularly given it creates disparity within the workforce.

It could also incentivise employees to be dishonest about the reason for their absence i.e. say that it’s not Covid-19 related and/or attend work whilst they are potentially at risk of infection and pose a risk to others because they cannot afford to stay in isolation or do not want to lose pay putting the health and safety of the wider workforce at risk.

Further, if unvaccinated employees previously enjoyed company sick pay as one of the benefits of their employment, removing that could cause resentment. Employers should bear in mind that benefits are there to be enjoyed, and so removing those from employees because more employees are making use of that benefit might be viewed as a breach of trust and confidence.

Changing terms and conditions

As above, company sick pay may be a benefit that employees enjoy as part of their contract with the business. If this does form part of an employee’s contractual entitlement, then withdrawing that would amount to a change to terms and conditions of employment and an appropriate process would need to be followed prior to doing so. Employers considering this should check their employees’ contractual entitlements as well as the terms of any sick pay policy to see whether they have any discretion within that not to pay company sick pay.

Acas has recently published guidance for employers around making changes to employment contracts and an employer’s associated responsibilities.

This emphasises the need for consideration of alternative potential solutions and meaningful information and consultation with members of the workforce who are affected by the proposed change(s).

Depending on the numbers affected by the proposed change, the requirement to collectively consult with employees might also be triggered, involving strict requirements.

We would advise that employers seek a consensual change in the first instance before seeking to impose any change or follow a dismissal and re-engagement process, although that consent may not be forthcoming given more employees are likely to be self-isolating over the coming months.

Summary

In summary, whilst it is possible for employers to adopt the same approach as IKEA and many other well-known employers have, we would recommend employers give careful consideration and seek legal advice before doing so because of the potential risks involved.

As a starting point, employers would be well advised to undertake a review of their workforce to ascertain numbers of those who are not vaccinated against Covid-19 so that any decision reached is well informed and prepare a list of objective business reasons which could justify the removal of any sick pay benefit.