The idea behind the new Health and Work Service is that it will save employers money by helping sick employees get back to work. The truth, as ever, is rather more complicated than that.

The new service is reported by the BBC as providing free Occupational Health assessments ‘starting from April’. However that is not right. This April is the expected date for awarding the contract to provide the service. Roll out should begin towards the end of this year, but full implementation is scheduled for April 2015. A good overview of how the new service is going to be structured was given by a webinar for potential suppliers last October. You can read the script here – and its very interesting!

The Service is being paid for by the abolition of the last remaining subsidy for Statutory Sick Pay. The Percentage Threshold Scheme kicks in when an employer’s liability for SSP in a particular month is more than 13% of that month’s National Insurance Contributions. However the scheme will be abolished in April this year  leaving employers wholly responsible for funding the sick pay paid to absent employees.

When the Government announced this change just over a year ago it said that the scheme currently costs the exchequer some £50 million per year – mostly in the reimbursement of small amounts. I can quite see why the Government would want to stop spending this money but I find their stated reasoning for the change – that it created a perverse incentive for employers not to manage attendance effectively – pretty unconvincing. I doubt many small or medium sized companies would be relaxed about their overall sick pay bill being high enough to qualify for relief.

However the move presents a bit of a presentational problem. The Government has made great play of how it is reducing the regulatory burden on employers and yet here it is increasing that burden to the tune of £50 million a year.

Luckily they have a plan. Scrapping the Percentage Threshold Scheme ‘frees up funds’ to set up the new Health and Work Service. This will provide free Occupational Health Assessments for employees who are off sick for 4 weeks or more. It will also provide a website and  a helpline giving information and advice to anyone who wants it. The Government is talking up its likely impact. The BBC quotes ‘ministers’ as saying that it could save employers ‘up to £70m a year in reduced sickness pay and related costs’. Sky has the same figure. The idea appears to be that this new service will result in sick employees coming back to work earlier than they otherwise would. 

I’m sceptical.

Occupational Health can be a valuable service. But if it isn’t done right it can be a waste of time and effort. I regularly talk to employers who are frustrated that the OH assessments they receive simply regurgitate what the employee has told them and offer little in the way of independent or useful advice on how to get the employee back to work.  The key is to ask OH the right questions and work closely with them to come up with a return-to-work plan.

I just don’t think that the Health and Work Service will be in a position to do that. The service will provide a largely telephone-based assessment, mainly through GP referrals. The Government expects a minimum of 350,000 employees to be referred in the course of a year (out of a total of 850,000 who will qualify) and the total budget for the service is £38.5 million per year. That covers not only the costs of the assessments but also the setting up of  the website and helpline, all the capital costs, and of course a reasonable profit margin for the private sector providers who will be running the service. Ignoring all of those additional costs – and assuming minimum take up – that’s about £110 per case. I suspect that that is a whole lot less than the current cost of an average OH referral. How much does the Government realistically expect to get in the way of a personalised, case managed approach to getting the long-term sick back to work?

The truth is that they probably aren’t thinking that far ahead. By claiming that the service could save £70 million, the Government is able to argue that instead of increasing costs to business by £50 million it is actually saving business £20 million. The fact that this is unrealistic nonsense is just a technicality that can safely be ignored. The true impact will be next to impossible to measure and won’t be know until well after the next election.

A new standard in unfair dismissal cases?

If I were in the OH business, I’m not sure I would welcome the Government ploughing £38 million a year into setting up a rival that provides its services for free. As an employment lawyer, however, I have a different concern.  Once there is a free OH service available, it would seem reasonable to expect even very small employers to take advantage of that service before dismissing for ill-health. This could provide an extra hoop for employers to jump through before they can safely dismiss. An employer who did not follow the recommendations of the Government funded OH service may well be found to have unfairly dismissed an employee – or failed in its duty to make reasonable adjustments.

But whose side will the OH service be on? Its no good saying that everyone shares an interest in getting sick people back to work. When it comes to the detail of how the service will be provided the inclination of the individual OH professionals providing the assessments will make a big difference. Will they essentially operate as an advocate for the employee? How often will they tell an employer ‘this person is unlikely to return to work’? How responsive will they be to points raised by the employer? Perhaps most importantly, how long will the process take? Will employers be forced to delay tackling a problem because they are waiting for someone from the Health and Work Service to get back to them?

At this stage – a year before the service begins – the Government will no doubt discount such fears. But to me, this scheme has the makings of a significant blunder which could wrap businesses up in a whole new layer of bureaucracy. Ironically, a Government scheme intended to benefit employers may actually end up costing them more.