New research by Policy in Practice shows that low sick pay may undermine Test and Trace as people on low incomes could lose £100’s of pounds if they are asked to self isolate. Some households who are asked to self isolate will struggle to bear the immediate financial costs of relying on Statutory Sick Pay. If their loss of earnings is too great, they may feel they need to return to work, and thereby risk spreading COVID-19. Duncan Hatfield, Policy and Data Analyst for Policy in Practice, shares his analysis.

Download report COVID-19: Can working low-income households afford to self isolate?

Low sick pay may undermine Test and Trace

The government is asking anyone contacted by NHS Test and Trace to self isolate for 14 days to ensure they do not pass on the virus. With reports that councils are now diverting funding directly to care providers to supplement carers’ Sick Pay and ensure they can safely self-isolate, adequate Sick Pay is clearly a crucial factor in many people’s ability to self-isolate.

New analysis from Policy in Practice finds that over 450,000 working low-income households may not be eligible for any Statutory Sick Pay if they are asked to self-isolate and cannot work as a result. Nearly one million households will at least be guaranteed £95.85 Sick Pay per week from their employer, but relying on this would still mean on average they lose £191 of earnings over the two weeks of isolation, representing the loss of half of their usual take-home pay. If we also take into account those who are not eligible for any Sick Pay, the average household might lose £176 of earnings while isolating, more than half (58%) of their usual pay.

Official government figures for February and March 2020 suggest there are at least 1.3 million low-income households who receive Housing Benefit or Universal Credit and also rely on earnings from work. These households would all be at risk of losing earnings if asked to self-isolate. For some households who are already struggling to make ends meet, a request to self-isolate for 14 days will mean facing an immediate choice between a loss of their weekly or fortnightly paycheck and the resulting struggle to meet their immediate costs, or returning to work in order to survive, and thereby potentially spreading COVID-19 further through their community.

For many, Universal Credit, new-style ESA or Housing Benefit will make up some lost earnings in the longer-term (up to five weeks), but almost a quarter of the lowest paid workers are paid either weekly or fortnightly, so any loss of earnings could mean in the short-term they are left out of pocket, in which case they may feel they cannot afford to self-isolate.

Analysis finds Sick Pay rules mean many low-income households will struggle to self-isolate as part of Test and Trace

  1. The average working low-income household will lose more than half (58%) of their usual fortnightly take-home pay if self-isolation prevents them from working, and their employer pays them no more than SSP.
  2. Some households could lose more than £1,000 in earnings over two weeks. We identified almost 1,300 households across eight local authorities who could lose over £400 if asked to self isolate. If this was reflected across England and Wales, more than 47,000 low-income households could lose over £400 in earnings. The ability of such households to voluntarily and, crucially, safely self isolate when requested, is questionable. But if they cannot self isolate, insufficient Sick Pay could contribute to a second wave of the virus and COVID-19 may spread further through their community.
  3. On average, a working low-income household who is asked to self isolate stands to lose £176 over the two weeks if they cannot work.
  4. If households are paid weekly or fortnightly and have costs to meet while self-isolating, these losses could push 16% of working low-income households into cash shortfall, potentially forcing them into debt in order to make ends meet. The large majority of these households do not have any savings to fall back on (63%) and just 31% have enough savings to cover their potential shortfall.Bar graph illustrating how low sick pay may undermine Test and Trace
  5. In the eight local authorities we looked at, this would mean 3,405 households who may not be able to meet their costs while self-isolating without taking on debt.
  6. If this pattern was reflected across England and Wales, this could mean over 155,000 households would be unable to make ends meet if they were asked to self isolate. They could be faced with a choice over whether to self isolate as requested and struggle to meet their immediate costs or to continue going out to work and risk spreading COVID-19. Some might feel they have little choice but to return to work to survive.
  7. Among those who earn enough to receive SSP, working low-income households will face losing £191, half of their take-home pay over the two weeks of self-isolation. 13% of these households might struggle to meet immediate costs if they were asked to self isolate.
  8. Figure 1 shows how, if required to self isolate for two weeks, a single parent who is eligible for SSP could be £164 worse off by the end of the month, even after Universal Credit softens the blow to their earnings.
    Example from Policy in Practice's Benefit and Budgeting Calculator illustrating how low sick pay may undermine Test and Trace

    Figure 1. A single parent who is eligible for Statutory Sick Pay could be £164 worse off by the end of the month if they self isolate

  9. More than 450,000 working low-income households (33%) do not earn enough to be eligible for SSP, so will face losing 100% of their earnings, with the only short-term help available being a Universal Credit advance if they are not already on Universal Credit. These households are unlikely to be eligible for new-style ESA, so they would have to wait for their benefits, which may take up to one month for those already on Universal Credit.
  10. Figure 2 shows how, if required to self isolate for two weeks, a single parent who is not eligible for SSP could lose more than £140 from their monthly take-home income. Because their usual earnings were already less than their work allowance, their Universal Credit award remains the same, even as their earnings decline. Their lost earnings are not replaced by either SSP or Universal Credit.
    Further example from Policy in Practice's Benefit and Budgeting Calculator illustrating how low sick pay may undermine Test and Trace

    Figure 2. A single parent who is not eligible for Statutory Sick Pay could lose 2 weeks worth of earnings from their monthly take home income if they self isolate

  11. The average loss in fortnightly earnings for those not eligible for SSP is £145, with dual-earner households potentially losing almost £480 in earnings over the two weeks of isolation if both were requested to self isolate. Among those not eligible for SSP, 23% might struggle to meet their immediate fortnightly costs if they were asked to self isolate.
  12. This analysis about how low sick pay may undermine Test and Trace only focuses on low-income households in England and Wales. If we looked at those with higher earnings, the loss of earnings maybe even more difficult to manage. Those with lower earnings currently are least likely to receive SSP and are likely to be less well-equipped to cope with a financial shock, so maybe of most concern, but equally, those who have more to lose may have bigger costs which they may then struggle to deal with on reduced earnings, and without an existing Universal Credit claim to fall back on. If any households, low or high income, feel that they cannot self isolate given the loss of earnings required, Test and Trace may be undermined.

Some households will be penalised for doing the right thing

In March the Prime Minister repeatedly assured MPs and the public that “we will ensure that nobody is penalised for doing the right thing”. The findings above make it clear how low-income households who are asked to voluntarily self-isolate by NHS Test and Trace will be penalised financially for doing the right thing.

People who are on Universal Credit who are not eligible for SSP, and currently earning less than their work allowance, will lose all of their earnings for two weeks. For those who earn more, SSP and Universal Credit will at least supplement some of their income, but they will still be penalised financially, losing at least one-third of their earnings for the two weeks of isolation.

Within the eight local authorities our research focused on, we identified at least 29,000 households who would be financially penalised if they are requested to self-isolate. If this pattern is reflected across England and Wales, we estimate there are 1.3 million households on Universal Credit and Housing Benefit who would be likely to lose out while self-isolating.

More than 100,000 of them would lose over £300 of earnings, with only up to two-thirds of this able to be redeemed via a subsequent Universal Credit award. Similarly, we estimate there are 155,000 low-income households in England and Wales who would find it difficult to meet their immediate costs if requested to self-isolate, as a result of their lost earnings.

The situation for higher earners, who may not be able to rely on Universal Credit, or will at least have to wait five weeks if they make a new application, maybe even more severe, with more earnings to lose and higher costs which they will still have to meet. Clearly, if earners have to rely on SSP while self-isolating, they will be penalised for doing the right thing.

Policy in Practice calls for Sick Pay to be increased, if only temporarily

To avoid penalising households for doing the right thing and seeking to protect their community from COVID-19, Sick Pay must be reformed. It needs to be increased and made available to all employees during this pandemic to help ensure those who are requested to self-isolate feel able to and are better protected from income pressures which might otherwise risk the government’s Test & Trace strategy. If Sick Pay is not raised, up to 155,000 low-income households who may not be able to meet their immediate costs if requested to self-isolate may feel they have little option but to choose between entering debt or potentially spreading the virus at work.

“As we emerge from lockdown we all want to do the right thing by self-isolating to protect the health of ourselves and our families. Low sick pay may undermine Test and Trace and make some of us choose between our health or our finances. Given the impact of COVID-19 on the wider economy, government should raise Sick Pay levels until we are out of the woods.”

Deven Ghelani, Director and founder of Policy in Practice

Self-isolating households must be made aware of other support available

While low sick pay may undermine Test and Trace and needs to be reviewed, in the short-term people also need help to navigate the system to ensure they are best equipped to cope with any loss in earnings. The government must ensure those who are asked to self-isolate are aware of the extra help they can get in the form of other benefits. Likewise, support agencies and local authorities should signpost to resources, such as Policy in Practice’s free benefits calculator, which will help households to clearly understand what supports are available to help them cope with a loss of income.

Local authorities concerned about the ability of such households to self-isolate safely can be proactive and target those most at risk to ensure they get all the assistance they are likely to need when self-isolating. Proactively reaching out to these households could be the difference between them entering a spiral of debt and them safely self-isolating then returning to work.

Some leading local authorities use data analytics via a Policy in Practice LIFT Dashboard to do just this. Other local authorities who are interested in using their existing administrative data to avert both financial and health crises should contact hello@policyinpractice.co.uk for more details.

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