I move: "That the Bill be now read a Second Time."
This Bill creates a new workers’ right in Ireland. For the first time, employees in Ireland will be entitled to statutory sick pay from their employers. It is one of five new workers' rights I am establishing this year. The other four are: a new public holiday, which has been signed into law; the right to request remote working, which is undergoing pre-legislative scrutiny in committee; better protection of workplace tips and gratuities, through the Payment of Wages (Amendment) (Tips and Gratuities) Bill 2022, the Second Stage of which has been passed by the Seanad; and new rights around redundancy for people laid off during the pandemic. The legislation for those new redundancy rights was signed into law last week and I signed the commencement order for it this afternoon.
Introducing statutory sick leave is part of the pandemic dividend, in respect of developing a more inclusive economy and fairer society. The pandemic exposed the vulnerable position of many people, especially in the private sector, when it comes to missing work due to illness. No one should feel they have to go work when they are sick because they will lose all their income otherwise. It is not just bad for them, but it is also bad for public health, as sick workers may infect colleagues, clients and customers and be more likely to make a mistake, injure themselves or do harm to others. Ireland is one of the few advanced economies in Europe not to have a mandatory employer-funded sick pay scheme. Cyprus and Portugal are the only other EU members that do not have employer-funded sick pay or state financial supports similar to Ireland’s illness benefit scheme. The United States, Japan and South Korea also do not have such a provision. It is part of President Biden's agenda in the US and Canada is taking steps to introduce employer-funded sick leave at national level.
This scheme compares favourably with the sick pay scheme in Northern Ireland and Britain, which pays only £96.35 weekly. Many employers – we think approximately half – provide sick pay, but we need to provide that security and safety net for all workers, regardless of their jobs. This Bill ensures that paid sick leave will be available to all workers. It covers full-time and part-time employees. As a result, the Bill will lessen the inequality between the public and private sectors. Nearly all public servants have access to paid sick leave through the public service sick leave scheme. Coverage in the private sector, however, and particularly among the lowest-paid workers, is much lower. Private sector employers providing sick pay are at a cost-competitive disadvantage compared to those that do not. That is not right either.
Statutory sick pay is the latest in a series of actions that have improved social protections for workers and the self-employed over the last five years. These include: the introduction of paternity benefit; parental leave benefit; enhanced maternity benefit; treatment benefit; and the extension of social insurance benefits to the self-employed, including dental and optical benefits, invalidity pension and jobseeker's allowance or benefit. Statutory sick leave will be additional to existing forms of leave and it will be phased in as part of a four-year plan.
As a starting point, it will cover the three waiting days before eligibility for illness benefit from the State kicks in. As we know, illness benefit can last up to two years. Where an employee has an extended period of illness, this scheme will operate seamlessly with the existing illness benefit system. Once employees have exhausted their entitlement to paid sick leave from their employers, they will then move onto illness benefit paid by the State, provided they have made adequate PRSI contributions. The length of coverage will increase over time, eventually providing for an entitlement to ten working days or two weeks annually in the fourth year of the scheme’s operation. The savings to the Social Insurance Fund will enable us to improve illness benefit payment rates and link them better to earnings.
I fully understand that many businesses are struggling now with additional costs because of the Russian invasion of Ukraine, as well as the impact of Covid-19 and Brexit. This is also one of a series of reforms the Government is introducing that will have costs for business, including auto-enrolment, and that is why we must ensure we phase them in and sequence them appropriately. We must be fair to employees and employers, particularly SMEs, so the cost is going to be shared between employers, employees and the Government. It will be phased in and we will ensure there are proper controls. The scheme has been designed based on consultation with employee and employer representatives. Prior to seeking Cabinet approval for the draft of the Bill, my officials undertook a full public consultation that sought the views of relevant stakeholders and the public on key policy questions around the design of the scheme. In addition to the public consultation, my officials also undertook an international review to get a better understanding of how sick leave schemes operate elsewhere.
I have been clear on what regulations under this legislation will provide for in order to make it predictable for employees and employers alike. Regarding rates, statutory sick pay will initially be paid at 70% of regular earnings, up to €110 per day, from the first day of illness. We are aware that employers in some sectors will also have to deal with the cost of replacing staff out sick at short notice and we are setting a cap to give those employers certainty around the costs involved at the outset. I refer to the costs of replacing employees who are sick and covering sick leave. The regulatory impact assessment, RIA, of this scheme illustrates that a scenario in which everyone were to take the full three days of sick leave in year one would increase payroll costs by 0.8%. When this scheme has been fully introduced, the additional payroll cost will be 2.7% annually, and that is not dissimilar to a year's pay increase. It is important that we bear this point in mind in respect of the cost to employers.
From the employee perspective, the Bill ensures they will receive an appropriate and predictable level of compensation if they are unable to work due to illness or injury. A minimum rate entitlement will also be set to ensure that all workers receive a reasonable level of financial compensation, even if they work part-time or are on low pay.
I will now provide a brief explanation of the various sections of the Bill. Sections 1 and 2 are standard provisions setting out the Short Title and commencement, and necessary definitions. Section 3 gives the Minister the power to make regulations for matters referred to in the Bill and requires the Minister to lay those regulations before the Oireachtas. Section 4 provides for expenses incurred in relation to the Bill to be refunded out of moneys provided by the Oireachtas.
Section 5 sets out employees' entitlement to statutory sick leave and the conditions employees must satisfy to qualify for paid sick leave. Initially, an employee will be entitled to three paid sick leave days in a calendar year. This may seem modest, but it is set at that level to ensure that excessive costs are not imposed on employers at the outset. It will increase incrementally over time and absences may be consecutive or non-consecutive. It is important to point out that illness benefit kicks in on the fourth day.
Regarding eligibility, employees will be required to have worked for their employer for 13 weeks before becoming eligible to avail of paid sick leave. This is to allow time for an employment relationship to develop between employers and employees and it is a common requirement in other forms of statutory leave, such as carers or parental leave, and in existing company-level sick pay agreements. It is also a common requirement in other jurisdictions that have sick pay measures in place. The 13-week service requirement is subject to the definition of continuous service set out in the Minimum Notice and Terms of Employment Act 1973. This ensures employees cannot be dismissed and rehired immediately by unscrupulous employers to deprive them of their entitlement to paid sick leave. That said, in response to the recommendation of the Joint Committee on Enterprise, Trade and Employment, officials in my Department will keep this provision under review, and we may consider amendments on Committee Stage.
Any day taken as sick leave will require a medical certificate from a registered medical practitioner. It would be unreasonable to introduce a legal obligation for employers to pay for sick leave without the need for a worker to produce evidence for this in the form of a medical certificate. That would not be sick leave; it would be a different form of leave if not required. The requirement for a medical certificate is a fair and necessary provision. It is also not an unusual requirement. The State, for example, requires employees to provide medical certificates to access our illness benefit scheme and it is also a requirement in many sectoral and company-level sick pay arrangements. Companies can, of course, waive this requirement if they wish. It is not mandatory that companies request medical certificates be provided, but they can and are legally protected if they do so.
Section 6 provides that the number of sick leave days provided for under the Bill may be increased or decreased by ministerial order, provided the entitlement is not reduced below the three days per year, and other matters the Minister may wish to consider in doing so.
Given the close links between statutory sick leave and illness benefit, and the need to ensure alignment between the two schemes, the section provides for consultation with the Minister for Social Protection in advance of any increase or decrease in sick leave days.
Section 7 provides for the setting of the rate of payment in respect of sick leave by ministerial order. As I said, the intention is to introduce sick pay at a rate of 70% of regular earnings up to €110 per day, and a minimum entitlement will also be set. I know some stakeholders believe the rate of payment and earnings cap should be set in the Bill itself. I do not agree with that. Doing so by ministerial order allows greater flexibility. It will allow the rate to be revised, as necessary, in line with inflation and changing incomes. I have been very clear on the medium-term plan to make sure that employers know what their obligations will be and that employees know what their entitlements will be, too. However, I also want this legislation to be fit for purpose in the longer term, and that is why we intend to set the payment levels by regulation.
Section 8 provides that nothing in the Bill will prevent the inclusion of more favourable provisions in respect of sick leave in a contract of employment. As is always the case with any workers' rights legislation, this legislation sets out the minimum standard that an employer must provide. It will not prevent employers having superior sick pay schemes to that required by law.
Section 9 provides that obligations under the Bill will not apply where the employer provides his or her employee with a sick pay scheme that confers benefits, over the course of a reference period set out in the scheme, that are more favourable. For businesses that genuinely cannot afford to pay we have included, under section 10, an inability to pay provision. This allows the Labour Court to grant an exemption to a business from its obligations under this Bill, for a period of not less than three months and not more than 12 months. There is a similar provision in the National Minimum Wage Act 2000. It will only be granted where there is a real risk to business sustainability. My understanding is that this provision in the National Minimum Wage Act has never been used.
Section 11 provides that the rights of an employee will not be affected by exercising their right to sick leave under this Bill and that sick leave may not be recorded as any other form of leave. It also provides that where an employee is on probation, an employer may suspend the probation period while the employee is on sick leave.
Section 12 provides that an employee cannot be penalised for exercising their right to sick leave under the Bill. Sections 13 to 15, inclusive, deal with enforcement and compliance issues and provide for the relevant amendments to be made to the Workplace Relations Act of 2015. This enables and authorises the WRC to carry out inspections and to take complaints regarding compliance with the Bill. As with other statutory employment rights, where an individual believes they are being deprived of rights to which they are entitled under the Bill, they will be able to refer a complaint to the WRC. There the matter can be dealt with by way of mediation or adjudication leading to a decision that is enforceable through the District Court. WRC inspectors can also be asked to investigate certain breaches of the provisions of the Bill.
I think all reasonable commentators and stakeholders will recognise that this Bill represents progress. It will improve the rights of workers. Events of the last two years have shown how necessary this legislation is. While it represents a new expense for some businesses, it is common across Europe that employers cover a portion of sick leave costs. We have taken care to ensure that costs are not excessive. Some have said and will think the Bill goes too far, and others that it does not go far enough. As Minister, I have a responsibility to strike a fair and reasonable balance, giving protection to employees and predictability to employers.
Ultimately this Bill means that workers will not have to attend work while sick though economic necessity. This will be one of the positive legacies to emerge from the pandemic. While I know Deputies will differ on the approach, I think we are all agreed that this legislation is the right thing to do and the sooner we can implement it, the better. I ask for the help of colleagues in the House to allow us to progress this Bill quickly through the Dáil and Seanad. I would like to have it done in a matter of weeks so we can have the scheme up and running and this new right in place by the middle of the year.