The most succinct official explanation came in Employer Bulletin 46 , which confirmed the percentage threshold scheme (PTS) for SSP would be dropped at the end of the 2013-14 tax year.

The Department for Work and Pensions is taking steps to abolish the Statutory Sick Pay Percentage Threshold Scheme at the end of the 2013-14 tax year. At that point, employers will have until the end of the 2015-16 tax year to recover SSP paid before the end of the 2013-14 tax year. The current SSP record-keeping requirements associated with the Percentage Threshold Scheme will also be abolished at the end of the 2013-14 tax year. However, employers will still be required to maintain SSP records for Pay As You Earn (PAYE) purposes and will still have the obligation to produce SSP records to meet the legal SSP obligations, should HMRC require them. At the moment, about 100,000 employers claim reimbursement through the PTS with an overall cost of £50 million a year. The average PTS payment is £500 per annum, per employer. On top of this, the additional administrative burden associated with the scheme costs employers between £2.5 million and £5 million a year.

The record-keeping requirements associated with the PTS will be dropped, but HMRC warned employers will still be required to maintain SSP records for PAYE purposes. "However, employers will have the freedom to keep these records in a more flexible manner which best suits their organisation," the department added helpfully.

The decision was made following a government review that found "PTS has not encouraged employers to actively manage sickness absence in the workplace". Instead, it will reinvest the £50m or so saved in a new Health and Work Service (HWS). The gov.uk website explains that when it is up and running later this year, the HWS will provide occupational health support and advice for small employers and their employees.

Anyone who has been off sick for four weeks will be referred to the HWS, which will carry out an assessment and give employees a return to work plan with information on how to get appropriate help and advice. A tax exemption of £500 is also promised for medical treatments recommended by the HWS or an employer-arranged occupational health service.

If you were used to reclaiming payments via RTI submissions, you will discover on your next pay run that the mechanism is no longer available following last weekend's HMRC software upgrade.

Originally, SSP was introduced alongside a 1% reduction in employer's NIC. This time around, the move to full funding by the employer was accompanied by the introduction of the £2,000 employer's NIC allowance. However that link was not made in a letter sent to employers last week by the Prime Minister extolling the benefit of the employer's allowance. What the government gives with one hand, it can take with the other; it just may not be so keen to tell you about it.

Noel Guilford is the principal of Guilford Accounting and is passionate about helping people understand their business numbers better. He can be reached on 01244 660866.