DWP

Department for Work and Pensions

(axton House Tothill Street London

SW1H 9DA

Your ref: GC-11/08/11 Our ref: POS(4)6141/1 Kezia Dugdale MS P The Scottish Parliament Edinburgh EH991SP

Telephone 020 73404000 Email ministers@dwp.gsi.gov.uk www.dwp.gov.uk

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September 2011

Dear Kezia Thank you for your letter of 11 August to the Minister of State for Employment on behalf of one of your constituents regarding Statutory Sick Pay (SSP). I am replying as the Minister with responsibility for this matter. There are two payments available to workers who are unable to work because of illness or injury. Firstly, there is SSP which is administered and funded by employers to qualifying employees and secondly, there is Employment and Support Allowance (ESA) available through Jobcentre Plus which is payable to those people who do not qualify for SSP. To qualify for SSP, the employee's average weekly earnings during the eight weeks immediately before sickness began must have reached or exceeded the Lower Earnings Limit (LEL). You have asked why the LEL is set at the current rate. The LEL is the point at which earnings count for statuto a ments like SSP and contributo benefits such as the Basic State Pension and ESA. From 6 April this year the LEL increased from 97 to 102 per week. The increase was determined in keeping with past practice by the September 2010 Retail Price Index of 4.6 per cent being applied to the rate of the Basic State Pension. The point at which employees start to pay National Insurance Contributions was also increased from 110 to 139 per week. This was an above indexation increase to ameliorate the increase in the rate of National Insurance Contributions paid by employees from 11 per cent to 12 per cent.

Freezing the LEL has exchequer effects because more people would potentially be able to gain entitlement to contributory benefits without paying National Insurance Contributions. Employees who cannot get SSP because their earnings fall below the LEL may be able to claim ESA. Employers must provide form SSP1 which explains why SSP is not payable and is used to support a claim for ESA. It is important that the employer completes this form as soon as possible. ESA is an integrated contributory and income-related allowance. Contributionbased ESA is based on the person's National Insurance contribution record. However, for claimants who have not paid enough National Insurance contributions and who do not have enough money coming in, they may still qualify for ESA under the income-related provisions depending on their individual financial circumstances. This ensures even the most vulnerable receive some support during periods of sickness. Yours sincerely,

Lord Freud Minister for Welfare Reform