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The UK's 2million low-paid workers could qualify for sick pay for the first time, the government claims today as it launches plans to overhaul the system.

Statutory sick pay is currently only available to people earning £118 or more per week - the 'lower earnings limit'.

Now a consultation will examine whether to extend the benefit to people earning below that threshold.

Department for Work and Pensions (DWP) officials claim this could include 2million workers - currently excluded by the limit - for the first time.

Other proposals include offering small firms a “sick pay rebate” to reward bosses who help employees on sick leave back into work.

And the consultation will look at strengthening legal guidance for firms to take "early, proportionate and reasonable" steps to help employees back to work - before dismissal on health grounds.

Eligibility and rules for sick pay could also be clarified, the benefit could become more flexible to allowed phased returns to work, and enforcement could be strengthened, officials claim.

It comes after a key body of the Council of Europe last year declared the UK's sick pay measures "manifestly inadequate".

The European Committee of Social Rights found people were often receiving less than 40% of the median income in the UK.

The DWP said more than 100,000 people a year currently leave their job after being off sick for at least four weeks, and 44% who have been off for a year leave employment altogether.

The consultation has been announced days before a new Prime Minister takes office - leaving doubt over how far its results will be implemented.

It has been launched jointly by Work and Pensions Secretary Amber Rudd and Health Secretary Matt Hancock, who could be moved from their posts within weeks in a Cabinet reshuffle.

(Image: Dan Kitwood)

Ms Rudd said: "I want Britain to be an environment where disabled people and those with health conditions can thrive, not just survive.”

Mr Hancock added: "We need to remove the barriers that stop people with disabilities or health conditions from reaching their full potential - these steps will help us achieve that."

Statutory sick pay is paid by employers and is worth a flat rate of £94.25 a week for up to 28 weeks.

The lower earnings limit is designed to stop workers earning more while off sick than they would if they returned to their job.

If it is approved, the change would make anyone who earns less than £118 a week eligible for sick pay equal to 80% of their wage.

Matthew Fell, chief UK policy director at the CBI, called for more flexibility in the system to support mental as well as physical health.

He said: "Adding greater flexibility to statutory sick pay so it supports mental as well as physical health makes sense.

"And [it] reflects the reality that one in four people will experience such an illness each year.

“Firms look forward to working with government to develop health and wellbeing approaches that work for business and for employees.”