Stealth tax on working parents? Little publicised change from April means families with Nanny could face £2500 bill for statutory sick pay *in addition* to replacement childcare costs

[nexusseven]

This must be a candidate for a Mumsnet campaign!!

Employing a Nanny is about to get much riskier. Previously, as a micro employer, families could reclaim Statutory Sick Pay from the Government if Nanny needed time off work through illness or injury. From April this will end.

So if Nanny has the bad luck of falling seriously ill, needing an operation or breaking a leg, families will need to foot a bill of up to £2,500 in SSP in addition to the cost of replacement childcare.

NB the cost is the same even if Nanny is part time: SSP is a flat rate to all those earning over £109/wk.

The change has been really badly publicised. Obviously it's bad news for all micro-businesses, and is just starting to attract some adverse comment amongst accountants, eg:

www.accountancylive.com/statutory-sick-pay-reforms-%E2%80%98catastrophic%E2%80%99-small-firms

But no-one seems to have picked up the serious implications for nannies and their employers. Financial liabilities for families, and therefore likely fewer jobs for nannies. Overall a serious blow to childcare options for working families.

What can we do about it???

Given that this is out of taxed pay, the potential pre-tax cost of SSP is over 3K if you are a basic rate tax payer and £4K if you are a higher rate tax payer.

I would have thought that most nannies (or carers) don't take long term sick leave, but if they do it isn't a cost that most people could easily cover.

I've come out of retirement for this one. First to clear up a couple of errors in a recent post:

SSP is indeed a benefit that hitherto has effectively been payable out of taxation (like job seekers allowance etc etc). the employer was merely acting as an agent for the payments
This is wrong. The cost of SSP falls on the employer. Small employers are (until 5th April 2014) able to recover some of the cost of SSP under certain circumstances.

This change, assuming it is correct, affects only small employers of domestic staff.
No, it affects all small employers.

It won't hit other small employers much because of the NIC 2k "allowance"
They will be hit just as much by this permanent change, the fact that they may be up to £2,000 better off in 2014/15 from a completely unrelated one-off incentive is irrelevant.

and it won't hit larger employers because they will have sufficient NICs to cover their SSP payments
That's not how SSP works, larger employers have never been able to do this. The only rules that allow you to offset any part of SSP against NI are the ones that are being abolished.

More later...

So to sum up the situation in as few words as possible:

Using figures applicable from April 2014, employers must pay Statutory Sick Pay to an eligible person (an employee paid at least £111pw) for all or part of a Period of Incapcity for Work. For short periods of sickness the calculations are complicated, but if an employee is off sick for a long period of time SSP is paid the rate of £87.55 per week for up to 28 weeks (a total of around £2,450). If after 28 weeks or more the employee returns to work, he must work for at least eight weeks before the clock is reset, so in fact the liability for a single year could in theory be as much as £3,852.

Under the Percentage Threshold Scheme, an employer is able to claim back any SSP he pays over a threshold of 13% of the total Class 1 National Insurance contributions for the month. So if the employer has no other employees, he will be able to recover all of the SSP except for some lost in the first and last months of sickness. However if the employer has taken on another employee to cover for the sick person, the amount recoverable may be less.

However the Percentage Threshold Scheme is to be abolished from April 2014, meaning that none of the maximum potential liability of nearly £3,900 for a single employee in a year can be recovered.

Yay! MrAnchovy is back.

thanks JoinYourPlayfellows

Finally (for the moment), if you want to complain about this write to your MP and/or the Department for Work and Pensions. So that they know what you are talking about, refer to the issue as "the abolition of the Statutory Sick Pay Percentage Threshold Scheme".

Beware that noone is going to have much sympathy for people employing nannies, there ought to be a little more sympathy for small businesses (but see below) but disabled people employing home carers ought to be able to attract attention - I'm not sure how much related charities have had to say about this.

As for the observation that this legislation impacts unfairly on small businesses, beware firstly of the £2,000 incentive in 2014/15 already mentioned but also beware that DWP think this is actually doing small business a FAVOUR because their employees will be the main users of the "new health and work advisory service" which will apparently ensure that they are able to return to work.

The impact assessment (written in impenetrable government speak) and the draft Statutory Instrument are essential bedtime reading.

[[http://www.personneltoday.com/hr/national-health-and-work-service-to-launch-in-april-2015/
Do you have any additional info on what kind of help they will be giving?]]

It seems that the health and welfare advisory service won't be fully operational until 2015.

"The service will comprise two elements: a health and work telephone helpline and online support for employers, employees and GPs; and access to an occupational health assessment for employees on a period of sickness absence lasting four weeks or more."

Sorry, that link is completely unrelated. I meant to say Do you have any additional info on what kind of help they will be giving?

Is the idea that the occupational health assessment tells people that they are no longer eligible for sick pay?

Apparently ministers are being very prudent and waiting until they have saved up enough money from no longer reimbursing SSP before making the service available:

"When will it come into force?

This is not known, but ministers say they hope to have it up and running by the end of this year."

www.bbc.co.uk/news/business-26108139

Funny you should say that Mr Anchovy, I contacted one of the main disability lobbying charities yesterday (Disability rights uk). No response as yet, I will widen the net... EDCM are a child disability charity not a general one, but they are well plugged into govt at the moment due to work on current legislation, so that would be my next port of call. Any other suggestions/contacts would be welcome.

I spoke to a very helpful chap at Fish (the specialist insurers) who said as far as he knew they weren't aware of this issue, but he knew exactly who to escalate to in the organisation and they would call me back in a couple of days. They work quite closely with the Local Authorities trying to get everyone using Direct Payments properly insured to cover their legal obligations, so when they do call back I'll ask them if the LAs have a take on this. Given the state of LA budgets at present, I can't believe they will be keen to see their payments diverted to sick pay, leaving them to pick up the pieces when people are left with no support. Mind you, the current govt is on a mission to dismantle the LAs so I'm not sure how much help they will be.

I am aware that a childcare specialist insurer is looking at this at the moment.

"Is the idea that the occupational health assessment tells people that they are no longer eligible for sick pay?"

No the idea seems to be that the occupational health assessment tells people that they need a physiotherapy course costing up to £500 which their employer can pay for without it being a taxable benefit(!) and then they will be fit to return to work.

So another cost to the employer? Whilst physiotherapy through the scheme may not be a taxable benefit, it will still cost the employer money.

So it would be completely naive for an employer to assume that an employee's medical treatments recommended by the 'health and work service' might be covered by the NHS?

I'm sure NHS would be an option. But it would take the usual referral amounts of time, ie months. And in the meantime the employer is paying SSP. So a private alternative might be cheaper if it meant immediate treatment.

But this is a DWP red herring, based on the fiction that most long-term sick leave could be prevented with access to better diagnosis and treatment. It's pure fantasy. People go on long-term sick leave with problematic chronic conditions; the reason they get signed off by their GPs in the first place is because the GP doesn't have an easy solution to offer. The most common cause of long-term sickness is mental health issues: the fact that the DWP are offering "Occupational Health Assessments" as their main solution shows how far out of touch with reality they are.

I am reading this thread with much interest as we are going to be affected by this. Our nanny will be going off on very long term sick imminently. It is a terrible situation for her, but we are also very stressed about how we are going to cover both her SSP and additional childcare costs. The nanny payroll company have no advice for us other than to say we are "very unlucky". I have no idea how we are going to find this additional £2,500 over the next 6 months. This has absolutely put us off hiring a nanny again. The financial risk is too great. As pp have said, many who employ nannies are not well off. For us it is a stretch but with three young children, it was a more cost effective option. Not anymore. It is causing us sleepless nights and I cannot see how we can do anything about it. Even if insurance becomes available, it is too late for us to be able to take out a policy as we know about her illness. Mr Osborne has effectively given us no option but to go into debt.

Great to see you back mranchovy!

This seems to be big deal for nanny employers, could mean fewer jobs for nannies too.

But people are right, govt/public unlikely to have sympathy for nanny employers as higher-than-average wage earners.

On public sympathy: the key point here is that it's not (just) the stereotype of the rich family with live-in nanny who will be hit. It's any family who have opted for childcare through a nanny as it is (was) more cost effective with multiple kids, is only viable form of childcare that fits with work patterns etc. And the liability is the same (worst case scenario now uprated to nearly £4k in any one year for successive long term sick periods) regardless of how many hours of nannying they thought they could afford in the first place. So in my case I employ the nanny for only 2 days, and then shared with another family to halve the cost, but am still looking at a bill of £1-2k for the SSP when my nanny has her op.

And, as we've discovered, it also hits those with disabilities employing carers directly to provide social care services.

MuttonDressedAsSpam - my view is that the nanny (and other) payroll companies should come up with something rather better than "very unlucky". This is their business, what excuse do they have for not informing their subscribers earlier? I now understand this measure was "announced" in Jan 2013. I'm certainly raising this issue with my payroll company.

In terms of campaigning, Mr Anchovy is right: DWP is the lead Govt department, the Minister is Lord Freud.

Disability Rights UK are now aware of the measure and its wider ramifications (ie for those on direct social care payments) as well as the implications for job prospects for disabled people. R3 if you do want to follow up try ringing the policy and campaigns team to reinforce the point, they were quite receptive.

I've not been able to locate an Equality Impact Assessment (often published alongside the general Impact Assessment which looks at impact on businesses etc) so it's possible the Equality and Human Rights Commission might be interested and/or in extremis the decision could be challengeable by Judicial Review. But I think that that would need someone with a "protected characteristic" (eg disability in this case) to complain (and if it gets to court it's not a cost-free process I believe).

@MuttondressedasSpam
I think your MP is your only hope. And realistically the best that can be hoped for is a delay in introducing this, which will give some time for the insurance industry to come up with a "group" income protection policy for domestic employers (including employers of personal carers).

On public sympathy: the key point here is that it's not (just) the stereotype of the rich family with live-in nanny who will be hit.
No, but the press that "inform" the public only deal in stereotypes.

my view is that the nanny (and other) payroll companies should come up with something rather better than "very unlucky". This is their business, what excuse do they have for not informing their subscribers earlier? I now understand this measure was "announced" in Jan 2013. I'm certainly raising this issue with my payroll company.
There has been some noise about this in the HR journals since January 2013 so there isn't really any excuse for not letting you know. Not sure they can do much about it now though.

The Equality Impact Assessment issue is definitely one for DR UK, looks like DWP have dropped the ball here.

I think the more parents are penalised for hiring nannies legally, the more parents will choose to take them off the books.

It is nannies who will suffer.

Increased taxes of this kind are exactly why I moved from a full time nanny to an au pair / childminder combination. The trigger was actually when they took my child benefit.

This is not helpful to anyone, least of all the nanny.

Our payroll company emailed to tell me about the change three weeks ago, and the day before our nanny received her diagnosis. When I asked the payroll company for advice I was also given incorrect information, such as that the SSP would be pro-rata (not true) and that if she is off sick she only has to return for one day and the 28 week clock for SSP starts again ( also not true). This shows how unprepared they are for dealing with these issues. I am going to seek legal advice but I will also contact my MP, particularly if there is still a chance this change may be delayed.

I think the chance of delay at this stage is slim. They will already be dismantling the systems and reallocating the employees that currently deal with the reclaims. We might get a delay if:

• there was enough noise made, which would mean getting the meeja interested, or if
• there was judicial review about the lack of equality impact assessment, for which you'd need one of the lobbying charities to team up with someone like Maxwell Gillott.

Our payroll company emailed to tell me about the change three weeks ago, and the day before our nanny received her diagnosis. When I asked the payroll company for advice I was also given incorrect information, such as that the SSP would be pro-rata (not true) and that if she is off sick she only has to return for one day and the 28 week clock for SSP starts again ( also not true).

That is apalling - there is nothing changing about SSP itself, these rules have been the same for years and any payroll company that is not right on top of them is incompetant. Name and shame.

Employing a nanny for us is extremely marginal. This will make it uneconomic.
We have had a nanny on extended sick and the cost without SSP would have been v hard. SMP would be crippling. It is a risk we can't take.
So if one of us stops work, our nanny will lose her job then we lose, our nanny loses and the government loses.
The government loses most.
The income tax from the working parent, the employees national insurance from the working parent, the employers national insurance from the working parent, the nanny's income tax, the nanny's employees national insurance and the employers national insurance from the working parent.
And another working mother's careers down the drain.

Sorry but still in shock on this one so bumping for the later evening brigade.
Do you think an e petition would help.?
To lose the repayment of SSP/SMP and not get the NI cut feels incredibly unfair.