Partly of course it depends upon their performance when they actually do turn up.
Another factor is whether they are part of a "pool" of people who can easily be swapped around or whether their absence causes real problems.
Frankly the is also the fuzzy but important term about whether they are taking the piss.
I've found that the hardest line on these things is not from line managers but co-workers who resent having to cope with someone not pulling their weight.
Given the law on such things, I would of course not make the decision on whether they were "employable", but instead get HR to "counsel" them. This typically involves targets for attendance, and allowing them to speak to someone not directly involved. Sadly it must also include record keeping to protect the firm. They will want to both ring and be rung by the employee when off sick.
I have had in the past offered that the firm will pay for some sort of treatment, and once that included my cleaning lady of long service.
Before the new set of laws, I have occasionally told people "look just piss off and come back when your head is on right". Which got recorded as unpaid leave...
But as you say, that's a variable, I've worked in firms, where they'd be looking to sack them after a few days sick.
Some sick leave is a proxy for general disaffection with the job, and of course as we've seen earlier people use their own sickness as a cover when they think it more acceptable than the real reason, and that is not just kids.
I'd start asking for doctor's notes and other proof that the illness was real.
It's worth remembering that most firms have some form of insurance for long term sickness.
If there is some flexibility possible, then provided their lies haven't been too offensive, then that might work.
Ultimately though, it's not the employer's job to sort out the lives of his employees. You are paid to turn up and at least try and do something useful, if you can't do that then the days are numbered.
One side effect of the current set of laws as I understand them (as a non-lawyer) is that you can't do deals with employees.
What I'd prefer to do is offer something like "over the next year, you can take 30 days off, and we reduce your pay by x%"
I'm pretty sure I could be sued for doing that now, even though it would in my opinion be a humane solution.