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Decisions – Sick pay – In sickness, in health

Last May, supermarket giant Tesco announced it was going to test a pilot scheme, whereby the company would refuse to pay staff for the first three days an employee was ill.

The retail chain that makes £4.4m profit every day, and is on course to report a bumper £2bn annual profit, has axed sick pay in some of its stores and is testing other schemes to stamp out the ‘sickie’. Tesco maintains there are fewer absences in stores testing the schemes.

Curiously, Usdaw, the shopworkers’ union which represents about half of Tesco’s 220,000 workers, is co-operating with the plan.

In a letter to union representatives, Usdaw national officer Pauline Foulkes explained that staff in the 10 stores chosen for the trial were asked to co-operate with the trials by volunteering a temporary change of contract for 12 months. At the end of the trial, they will revert to their original contractual arrangements.

Absenteeism is costing UK business £11.6bn a year, argues the Confederation of British Industry. The business lobby group adds that workplace absence in the private sector increased last year for the first time in five years. The Chartered Institute for Personnel and Development says that an average absence rate of 12 days costs companies £600 per employee.

Lawyers agree that Tesco is within its rights not to offer employees full pay while on sick leave, although they are unsure whether other companies in the UK will follow suit. “It looks as if Tesco does not trust its employees, and this initiative might produce only a modest saving for the amount of disruption and ill sentiment it could cause,” says Chris Goodwill, partner and head of the employment practice at law firm Clifford Chance.

According to Warren Wayne, a partner in the employment department at solicitors Bird & Bird, most companies still pay employees full salary while they are off sick, usually reducing the amount of pay after a certain period of absence, even though they are not legally obliged to. “Companies tend to award full pay to employees that have called in sick for the sake of maintaining good employee relations. I can’t see there would be many employers rushing to follow Tesco’s example,” says Wayne.

Goodwill says that if companies wanted to stop awarding full pay for absence through illness, human resources departments would need to change employee contracts. But he also says that changing contracts for future employees is no big deal. “All companies need to do is to make explicit in their employment terms that they will not pay sick pay for whatever period. Once that agreement is signed, it’s concrete,” he says.

But Goodwill adds that “it will be more difficult to induce or convince existing employees to either opt for the new regime or sign a new employment contract depriving them of the right to claim sick pay entitlement”.

Simon Whysall, an employment solicitor at Reynolds Porter Chamberlain, says “companies such as Tesco might have a high staff turnover, which means they can change contract terms for most of their employees within a few years. But those companies with high staff retention rates will find it difficult to chip away at employees’ contractual terms.”

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