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The Employment Rights bill will expand the public sector’s perverse incentives across the economy
The Government should address Civil Service absences rather than punish businesses
Payroll employment is shrinking, vacancies are declining and firms are already holding back on investment
Whitehall is losing over four million working days a year to staff sickness: absenteeism in the Civil Service is on course to surpass its previous peak of 8.3 days per employee, with the Department for Transport already averaging 9.2 days lost per head. For taxpayers, this is not simply an HR statistic, but a bill for wasted resources and diminished public service delivery. And unfortunately, thanks to the Government’s Employment Rights Bill, this level of absenteeism could soon become the norm in the private sector too.Â
Under current employment law, the pattern in public sector is hardly surprising. The provision for Statutory Sick Pay (SSP) across all workplaces allows up to 28 weeks of leave, around 140 working days, with weekly pay set at £118 to each employee. But many government departments offer far more generous terms. Take the Home Office, which witnessed its sickness rate increase by 11.8% in the previous year: an employee in their first year of service itself can receive one month’s leave on full pay, followed by another month on half pay.
Such arrangements make extended absence financially painless for the employee. Moreover, under UK dismissal law, removing persistently absent staff is both difficult and costly. The Government knows that if these entitlements were used to their full extent, they would be economically unsustainable. Tensions are visible: recently in June, staff in the Deputy Prime Minister’s office staged industrial action after being told they could not work from home, while other reports suggest the Government is now scrambling to devise measures that encourage employees back into work more swiftly.
But instead of reforming the public sector’s perverse incentives, the Government appears set to replicate them across the private economy through amendments in Employment Rights Bill.
The Employment Rights Bill is, in effect, a public-sector blueprint for the private sector. It expands SSP while simultaneously weakening employer safeguards. From April 2026, SSP will be available from the very first day of employment, with no earnings threshold or waiting period. The current system requires three consecutive sick days before qualifying for SSP. For lower-paid workers, sick pay will be set at 80% of average earnings, making extended absence more attractive. At the same time, the Bill proposes to cut the qualifying period for unfair dismissal claims from two years to zero (though the House of Lords is proposing at six months). Either way, dismissal protections will become far more rigid, reducing employers’ ability to manage absence and underperformance.
Taken together, these changes make taking paid leave easier and managing absenteeism harder – a combination guaranteed to shift workplace incentives.
This is not a moral judgment; it is basic economics. Incentives matter. When absence has no real consequence and dismissal is procedurally arduous, absenteeism is bound to rise. The public sector is a textbook example. In 2023, the public sector averaged seven sick days per worker, compared to 4.3 days in the private sector. Among workers more broadly, salaried employees – who are entitled to different benefits and protections (though less generous than those in Whitehall) – the average number of sick days was 5.3 days per employee. By contrast, for self-employed individuals, who bear the direct cost of time off, the average was just 3.3 days per person.
Given this, the goal should not be to make the private sector operate like the public sector. The Civil Service’s sickness record is a warning, not a model. Replicating its incentive structures across the wider economy would mean more absenteeism, more bureaucracy and lower productivity.
Yet the Employment Rights Bill moves in precisely the wrong direction. It introduces one-size-fits-all statutory rules. A better priority would be to address inefficiency within the public sector itself. Reforming civil service absence would not only save taxpayers money but also give government a credible basis from which to advise private employers.
The Government should also be wary about the difference in context in which Whitehall operates. It does not face competitive pressures in the same way a firm operating in the market economy does – having workers off sick is not going to hit the bottom line. The Civil Service can ignore inefficiency because their funding is taxpayer-guaranteed. In the private sector, the consequences are sharp and immediate: every day lost undermines output, squeezes margins and threatens business viability. It is thus best to trust businesses to come up with their own sickness policies. Ministers should trust businesses to do what they do best – create jobs, wealth and opportunity, free from a framework that rewards absence over productivity.
This matters all the more at a time when the UK is grappling with low growth and business confidence is waning. Payroll employment is shrinking, vacancies are declining and firms are already holding back on investment and hiring. To layer new compliance burdens onto businesses in this climate is the wrong prescription. What is needed is greater flexibility, not further micromanagement from Westminster. Exercising restraint and resisting the urge to regulate every aspect of the employment relationship should be regarded as basic economic prudence.
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