UK retail giant John Lewis made headlines in mid-January when it announced it would not be following the example of some other frontline employers in cutting sick pay for workers not vaccinated against COVID-19.

John Lewis’s group operations director Andrew Murphy wrote on LinkedIn:

Examples of other UK employers taking the opposite view include IKEA.

Earlier in January, IKEA announced it would cut sick pay for unvaccinated staff who needed to isolate for up to ten days due to exposure to COVID-19. In the UK, fully vaccinated individuals do not have to isolate if they are in contact with someone with COVID-19.

In a statement to the BBC, IKEA said: “Fully vaccinated co-workers or those that are unvaccinated owing to mitigating circumstances which, for example, could include pregnancy or other medical grounds, will receive full pay.

“Unvaccinated co-workers without mitigating circumstances that test positive with COVID-19 will be paid full company sick pay in line with our company absence policy.

“Unvaccinated co-workers without mitigating circumstances who have been identified as close contacts of a positive case will be paid Statutory Sick Pay”.

Wessex Water, supermarket chain Morrisons and retailer Next made similar moves around removing Contractual Sick Pay for unvaccinated staff self-isolating.

However, those employers, like IKEA, made it clear that they will pay sick pay to unvaccinated staff if they test positive, rather than have just been in close contact with someone with COVID-19.

Considerations amid the ‘Great Resignation’

Cutting Contractual Sick Pay for unvaccinated employees is a big move for employers to take.

It leaves these workers with access to only Statutory Sick Pay of under £100 a week for a maximum of 28 weeks. This is a quarter of what the Guardian estimates IKEA workers, for example, would have access to £400 in weekly Contractual Sick Pay.

So, in light of the decision from these large British employers, UNLEASH spoke to HR and legal experts about their perspectives.

Should employers follow the model of John Lewis or IKEA, Next and Morrisons?

Dee Coakley, CEO at Boundless.

Boundless CEO Dee Coakley tells UNLEASH: “Singling out workers based on their medical choices, such as by cutting sick pay, is both a sensitive and emotive area.

“Ultimately, treating one group of employees one way, and another group differently is potentially very problematic…[it] could be “very damaging to not only employer brand, but also public brand image.”

This is a particular concern as the UK, like the US, is grappling with the ‘Great Resignation’. The ‘Big Quit’ is affecting frontline sectors like retail, healthcare, and food services who are experiencing record levels of vacancies.

While companies like Wessex Water are introducing this policy partly to reduce absences linked with COVID-19, could it damage their long-term ability to hire and retain talent?

Damian Kelly, head of employment law at Lodders.

“People are any businesses’ greatest asset and defining policies that deliver short term wins, but that may affect the company’s ability to hire and retain the best people over the longer term may prove to be a costly mistake to the company…over time”, adds Coakley.

Lodders’ partner and head of employment law Damian Kelly continues: “Employers should be mindful of damaging staff morale.

“How employees continue to handle the pandemic will go a long way to establishing strong levels of employee engagement”, which can hard to win, but easy to lose.

In this context, Kelly recommends that employers communicate the changes (and the rationale behind them) with staff.

Incentivizing change in behavior

However, HR advice and consultancy director at Peninsula UK, Kate Palmer, states that the staffing crisis some employers are currently facing linked with absences is having a real impact on “their business and its performance”.

Kate Palmer, HR advice and consultancy director at Peninsula UK.

Kelly adds: “COVID-19 generates a perfect storm for many employers who faced the combined challenges of increased infection rates, increased absence rates, labor shortages and a resulting increase in wage demands.”

It makes sense that cutting sick pay, and therefore reducing the costs of absences, is an viable way to cut staff costs.

Palmer is hopeful that this type of financial incentive “may make [unvaccinated] employees be more careful with their actions and behaviors outside of the workplace, including going to large events or not adhering to mask wearing…guidance” – this would reduce the likelihood of them coming into contact with someone with COVID-19 and having to isolate, thereby solving the absence problem.

It could also encourage employees to get vaccinated. This is central to Morrisons’ decision to cut sick pay for unvaccinated individuals and mentioned by Kelly.

Olimpia Kicielińska, head of HR at ShareSpace.

On the topic of incentives, ShareSpace head of HR Olimpia Kicielińska notes that her company has decided on an equitable approach to sick pay.

However, she notes that “persons unvaccinated by choice…may likely use up their sick leave limit much faster. They will then have to face the reality of decreased wages because of the additional unpaid sick leave they will require”.

Therefore, this in itself “allows unvaccinated staff to reconsider their choice, but not feel forced to make any decision”.

Logistical challenges of multiple sick pay policies

In addition to considering whether sick pay cuts is an incentive for the unvaccinated to change their behavior or will help companies to attract talent in the future, there are other challenges facing companies who want to implement a Contractual Sick Pay policies based on vaccination status.

Abigail Vaughan, COO at Zellis.

Zellis COO Abigail Vaughan tells UNLEASH that while “differentiating sick pay policies…may seem [like[ a logical incentive to reduce staff absences… there are serious implementation challenges to consider.”

She continues: “Most companies do not currently collect data about their staff’s vaccine or booster status, nor do they require a reason to determine the rate of sick pay”.

In fact, Jemma Fairclough-Haynes, CEO of Orchard Employment Law, tells UNLEASH that employees in the UK are “not under any obligation to tell their employer their vaccination status or an other medical record in accordance with Section 60 of the Equality Act”; this is unless they work in a health and social care setting.

Jemma Fairclough-Haynes, CEO at Orchard Employment Law.

There is an added challenge that companies are allowing for exemptions based on medical or religious grounds, and therefore, HR teams would need to apply these policies on a case-by-case basis, requiring “intense effort”, according to Vaughan.

There is the added challenge that the UK Government is constantly changing the guidelines on self-isolation – there has even been talk about scrapping isolation periods altogether in March.

So is “it really worth developing these changes at all,” asks Vaughan.

Potential legal issues

There are also a potential legal implications of companies differentiating between unvaccinated and vaccinated employees around sick pay.

Lodders partner Kelly notes that “reducing sick pay for all unvaccinated staff required to isolate could well lead to claims for unlawful discrimination by disabled employees” with medical exemption.

Thankfully, this is not an approach that the likes of IKEA, Next and Morrisons are taking; “employers would be well advised to follow the same path to minimize their legal claims exposure”, according to Kelly.

However, he warns that employers need to check their Contractual Sick Pay policies “to check that reducing sick pay in these circumstances doesn’t represent a breach of contract.”

Claire Brook, employment law partner at Aaron & Partners.

Orchard Employment Law’s Fairclough-Haynes agrees.

While it is possible for companies to change Contractual Sick Pay policies, “this should not be done unilaterally”. “We would advise that companies go through a consultation period of at least four weeks, and to take [legal] advice”.

Aaron & Partners employment law partner Claire Brook agrees about the need for consultation and says that “notice will be required before making any…change to contractual terms”.

Hannah Clark, head of employment at Waldrons Solicitors.

 

Waldrons Solicitors head of employment Hannah Clark adds that employees can also consider a “constructive dismissal claim”. This is also noted by Kelly.

“In a relation to a constructive dismissal claim, an employee may not just be looking at the wording of the contractual sickness policy”, but also the employers’ “implied duties of mutual trust and confidence”, according to Clark.

This means “the employer should not act in a way that is likely to destroy trust and confidence”, particularly around pay.

Brook continues that companies need to think careful about how “to exercise discretion” around the unvaccinated with medical and religious exemptions. There is also a need for companies to “update their data protection notices accordingly”.

Clark concludes: “Any employer wishing to start differentiating between vaccinated and unvaccinated staff should do so with extreme caution and only after taking specific legal advice.”

The situation in the US

While this situation is playing out in the UK, it is clear that US employers are doing the same thing – examples include American Air and Alaska Air.

This approach towards vaccination is likely to become more common now the supreme court has now blocked a federal vaccine or test mandates for large employers.

Amanda Baer, partner at Mirick O’Connell.

The situation in the US is a little different as there is no federal Statutory Sick Pay entitlements, therefore getting rid of workplace sick pay might be an even better incentive it the US.

However, like the UK employment lawyers, Mirick O’Connell partner Amanda Baer tells UNLEASH that this move is “problematic” because it raises issues around discrimination and retaliation.

Hugh Murray, partner at McCarter & English.

Instead, Baer recommends that US employers use positive incentives like additional sick leave to vaccinated employees, those who are unvaccinated because of a disability or religious beliefs.

“An employer may also consider offering additional sick time to employees for the purpose of receiving or recovering from the vaccine, and that would not have the same discriminatory or retaliatory implications”.

Hugh Murray, partner at McCarter & English, agrees. He adds that employers could considering giving vaccinated employees a few extra days of paid time off as an incentive during the pandemic.

What is your view? Are you leaning more towards John Lewis or IKEA’s approach?