Opening doors

To improve living standards for families across Britain it is crucial to do more to support people with health conditions and disabilities into work. This will also help the Government with its central mission of improving economic growth and reaching its 80 per cent employment target, while also reducing economic inactivity due to long-term sickness, and curb spending on incapacity benefits.  

So far, most attention has been given to policies that affect disabled people directly: a pledge to boost employment support offered to sick and disabled people, and the controversial changes to social security benefits debated in Parliament earlier this month. But the Government has also committed to doing more to encourage employers to hire and retain disabled workers, setting up the Keep Britain Working Review headed by Sir Charlie Mayfield. Ahead of the Review’s recommendations due later this year, this report brings together quantitative analysis, wider research, and findings from employer interviews to suggest a set of key principles that should underpin Government action in this space. 

On the face of it, there is good news in the form of a rise in the number of disabled people working. Since early 2014, the number of people in this position has risen from 3.0 million to 5.6 million, outpacing the 1.0 million growth in disabled people who are not working. This has raised disabled people’s employment rate from 44 per cent to 54 per cent. This includes rises in the employment rate for people with every different type of health condition, particularly mental health problems and learning difficulties. As a result, the ‘disability employment gap’ (DEG) – the difference in employment rates between disabled and non-disabled people – has fallen by 4 percentage points in the decade between 2013 and 2023 – though a sizeable gap remains (28 percentage points in the latest data). 

However, this measure gives a misleading account of what’s been happening over the past decade, because it is affected by changes in how people report disability: if less-severely-impaired people become more likely to report a disability, then the DEG will narrow, even if nothing has substantively changed. So over a period when the prevalence of working-age disability has risen rapidly (from 17 to 24 per cent), it is not sensible to focus exclusively on the DEG. Instead, a better measure is what we refer to as the ‘prevalence-adjusted’ gap – the prevalence of disability multiplied by the DEG, which measures the total labour market impact of disabled people’s lower employment rate. On this measure, things have been getting worse in recent years, with the prevalence-adjusted DEG rising from 5.4 per cent in 2013 to 6.8 per cent in 2023. The UK is also among the worst in the OECD on this measure, with a prevalence-adjusted DEG (at 6.2 per cent across 2016-2019) ranked well above that in France (3.2 per cent), Denmark (4.8 per cent) and the Netherlands (5.1 per cent).  

Disabled people’s chances of finding work differ considerably between different disabled people. This partly reflects the nature of someone’s disability. For example, those with stomach problems or diabetes have employment rates above 60 per cent, compared to below 40 per cent for those with learning difficulties or mental health conditions other than depression. But wider factors are also crucial: employment is higher in some regions and for people with higher qualifications among non-disabled people, but these variations are much larger for disabled people.  

This is partly about labour demand in general, but it’s also partly about the availability of suitable jobs. Among disabled people who are currently not working and receiving incapacity or disability benefits, two-thirds said they would need to work part-time, and three-quarters said they would need to overcome travel barriers to be able to work. But not all disabled people have access to such flexibility. For example, those working for large businesses are three-times as likely to have access to very flexible work than those from small businesses (18 per cent and 6 per cent respectively), while those with degrees nearly seven-times as likely to have access to very flexible work than those with only GCSEs or less (22 per cent vs 3 per cent).

Supporting workers with health conditions and disabilities makes it easier to hire staff with scarce skills, reduces the costs of sick leave, and increases the retention of talented and productive workers. Some good employers are, therefore, already making considerable efforts here, telling us that offering flexible working arrangements is a “simple” decision. But in too many cases employers are doing less than they should, and sometimes not even taking steps that would benefit their own bottom line, let alone other stakeholders such as disabled people and the taxpayer. This market failure is why employer incentives must be a vital part of the policy toolkit. 

Of course, we must be mindful of the risks and trade-offs involved, as there is a genuine chance of negative unintended consequences for both employers and disabled people. Four key risks have guided our policy development: the risk of wasting money (referred to as ‘deadweight costs’); the risk of negative economic impacts (e.g. locking people in unproductive, badly-matched jobs); the risk of increasing stigma (by labelling disabled people as ‘costly’ to employ, or ‘unproductive’); and the risk of worsening a culture of compliance. In the UK, we do not have a lack of process – 96 per cent of employers have processes for return-to-work, more than any other European country. But employers sometimes focus on box-ticking policies to cover their backs rather than genuine human engagement. Rather than reducing legal risks (when currently less than 1 per cent of those experiencing disability discrimination make even the first step towards raising a disability discrimination claim), we need to make sure that employers have clarity about what to do, and support to make genuine engagement easier than box ticking.  

With all of this in mind, we offer four concrete principles that we think can help shift the dial.  

1. An improved Access to Work scheme would help reimburse employers with costs that go beyond reasonable adjustments 

Our starting point is that employers will sometimes incur additional costs that go beyond reasonable adjustments, such as British Sign Language interpreters for people with hearing impairments. Currently, these costs can often be met through the Access to Work scheme – but this is under intense scrutiny, with the Government’s recent Pathways to Work consultation questioning whether it is fit for purpose. The backdrop is clear: spending on Access to Work has increased in real terms by £117 million over the past decade (an increase of 82 per cent), with the bulk of this (£98 million, or 83 per cent) relating to spending on Support Workers.  

However, we propose that Access to Work should be strengthened rather than scaled back. The Government should be wary about assuming that the cost is too high: we spend more than 170-times as much on working-age health and disability benefits (in 2023-24, this stood at £45 billion, compared to £258 million on Access to Work). There is no robust evidence of its effectiveness, but annual spending on Access to Work averages just £3,800 per person using the scheme, while the employment support schemes for disabled people included in the recent Pathways to Work Green Paper had a cost-per-job-outcome of between £19,000-£40,000. More fundamentally, there is a risk that by trying to reduce Access to Work spending by moving towards a scheme that only covers small expenses and has a lower cost-per-person, it would become a less efficient use of government funds, since employers are more likely to be able to cover small expenses themselves. 

We therefore think that it would be an own goal to substantially cut back a scheme that helps disabled people enter and remain in work at a time when the Government is looking to boost disability employment. And as one employer representative put it, “I think it’s probably the only government scheme where, spontaneously, members have come back to me to say this is a very good government scheme.” But there is room for improvement, and these should focus on: (i) scrutinising claims more appropriately by moving it to a new arms-length body with more specialist occupational health expertise; (ii) providing much more clarity about what counts as an ‘unreasonable’ expense that can be claimed back; (iii) improving the user experience so that turnaround times are quicker and support easily follows disabled people as they move jobs; and (iv) creating a more solid evidence base by testing the impact of an improved system on outcomes such as job retention.

1. Employment and pay gap reporting can help drive change, but should not be turned into crude quotas 

But we need to do more than just give employers funds for certain workers:  employers need to be held accountable for creating inclusive workplaces more broadly. We have had initiatives that lack accountability, like Disability Confident, an optional scheme where employers can signal that they are committed to best practice. But this was a failure: private-sector employers that signed up for Disability Confident were no more likely than others to employ disabled staff. Many therefore see mandatory employment and pay gap reporting as essential, with the Government consulting on whether to require this of large employers. We agree that this greater transparency will drive positive change. 

However, the Government should be careful not to turn this into a strict quota. Disability measures are more complex than those relating to gender or ethnicity (as we saw when discussing the DEG), and it is possible that workplaces that improve their employment practices will end up having fewer people reporting a disability per se (because as things improve, these workers’ health conditions no longer interfere with their work). And international experience suggests there can be problems with disability quota systems. We therefore welcome the Government’s consultation on mandatory reporting, but only if employers are required to use this data to drive inclusion, rather than simply setting a crude target. There are limits to how strong the incentives from greater transparency alone can be, and this underscores that further targeted action on employer incentives is also needed. 

1. The biggest impacts will come from incentivising employers to reintegrate existing workers (rather than encouraging box-ticking); we recommend doing this through a new ‘Right to Reintegration’ 

If we want to shift the dial when it comes to boosting disability employment, improving retention is likely to be more effective than improving recruitment. More than one-in-ten (12 per cent) disabled staff leave work each year, a figure that has risen over the past decade, and has consistently been 1.5-times that for non-disabled workers. And each year, twice as many people flow from work into inactivity due to ill health (304,000) than flow from inactivity due to ill health into work (151,000).  

There are already strong legal obligations on employers arising from the Equalities Act 2010, yet employers are simply not doing enough to retain existing workers. Less than half of disabled workers who request a reasonable adjustment have this granted in full. Discrimination also remains a pressing issue, with 15 per cent of disabled people reporting workplace discrimination relating to their disability in 2022. And line managers regularly talk about their ‘fear’ in dealing with sickness and disability, with employers often putting considerable effort into box-ticking HR practices that mitigate risk rather than helping workers. 

There are many ways of incentivising employers to do more with their existing workers. The Netherlands is a particularly good example: after introducing the sharpest employer incentives across the OECD in 2002, they saw a massive reduction in incapacity benefits inflows, equivalent to UK incapacity benefit on-flows dropping from 470,000 to 160,000 per year.  

We recommend that the Government introduces a ‘Right to Reintegration’ for workers on sick leave, where employers cannot dismiss workers unless they demonstrate that they have made sufficient efforts at reintegration. This would clarify and strengthen existing legal protections: it would provide a much stronger message to workers about what they are entitled to, and extend these rights further. This could potentially be enforced via employment tribunals, but the Government should also consider more proactive enforcement mechanisms, whether via the Equalities and Human Rights Commission or connected to a new system of caseworkers that are expected to be covered in the forthcoming Mayfield Review.  The aim is not to put additional strain on (good) employers: our aim is to nudge employers towards doing things that may take time and effort, but will ultimately benefit them as well as disabled workers. 

1. This needs to be complemented by a new ‘Return-to-Work Recruitment Incentive’  

Any new retention incentives should be complemented by incentives to support recruitment. This is partly because employers may be risk-averse when it comes to employing disabled workers who require flexible working arrangements; we find that 9.4 per cent of new starts in a job are able to work with ‘flexi-time ’, but this rises to 12.9 per cent of those who have been in their job for two years or more. But recruitment incentives are also needed because of evidence that stronger retention obligations can unintentionally discourage new hiring.   

We recommend that the Government introduces a ‘Return-to-Work Recruitment Incentive’ targeted at disabled people who have been claiming incapacity benefits for six months or more. We set out two possible models for delivery, one of which is a giveaway to employers and the other is a cost. First, in a model where costs are borne primarily by the Government, there could be a staggered payment to employers that share the gains of reduced spending on incapacity benefits when an employer takes on someone who was previously out of work due to ill health. Second, in a model where costs are primarily borne by employers, there could be a ‘disability employment levy’, which could be spent on various costs associated with employing this group (including wages, sick pay, workplace adjustments and disability inclusion practices) on a ‘use it or lose it’ basis, learning from the design of the Apprenticeship Levy.   

1. We need to do more to support part-time work where people would struggle to work full time  

Increasing part-time work is part of the solution to increasing the employment rate.  Among the ten OECD countries with the highest employment rates, the majority have higher proportions of people working part-time than the UK (including an astonishing 40 per cent of the working-age population in the Netherlands).  

But we need to be careful here, as we could end up reducing labour supply (if large numbers of full-time workers go part time) – the countries with the highest total hours worked per capita are often not those with the highest employment rates. There are also risks of increasing poor quality jobs (given historic problems with pay and progression in part-time work).  

We therefore recommend a careful twin-track approach. Firstly, it makes sense to increase the availability of part-time work in a targeted way focused on disabled people, including clarifying employers’ obligations as reasonable adjustments, and ensuring incapacity benefit recipients feel more confident in moving into appropriate part-time work (in terms of both conditionality expectations and work allowances). Secondly, the Government should consider whether broader efforts to support the supply of high-quality part-time work are needed. This is an issue that will only grow in importance (as a greater share of our working-age population have health conditions and caring responsibilities that limit their ability to work full time).  

1. There should be a clear ambition to create better working environments for all workers  

A policy of giving disabled people more flexibility and lower intensity at work compared to other workers will, though, only get us so far. This is partly because many people do not want to disclose their disability to their employer, and partly because of the practical limits to making exceptions to an established way of working. To significantly improve the employment rate of disabled people, we therefore need to create a workplace that works better for everyone.  

However, over the past 25-30 years, some aspects of the workplace have been getting worse. There have been some improvements, including sharp rises in homeworking and hybrid working (from 5 to 13 per cent and 14 to 21 per cent of employees respectively between 2017 and 2024). But we have also seen sharp rises in work intensity between 1992 and 2017 (only partly offset by a small fall to 2024), while workers’ control over how they do their job has fallen to its lowest level on record (with only 34 per cent of workers having high task discretion in 2024, almost half the 62 per cent who had it in 1992). There are also suggestions that we saw a sharp decline in ‘light work’ in jobs like cleaning and lift attendants in the 1980s: our new analysis shows that ‘light work’ declined sharply between 1986 and 1992 (from 41 per cent to 21 per cent of jobs), and sat at 15 per cent in 2017.  

Improving the quality of work is a wider agenda, and not always straightforward. For example, a higher quality of line management is clearly desirable but is not an easy target for government intervention. Nevertheless, there is a clear need to link disability employment to the quality of work, and we found support among both employers and wider policy stakeholders for action in this space (for example, creating sectoral standards on flexible working and disability inclusion, and boosting the role of the Health & Safety Executive (HSE)).  

Boosting disability employment is not straightforward: it will involve improvements to the health system, benefits system and world of work. But action to incentivise and support employers is a vital piece of the puzzle. If it creates a serious strategy to shift employer behaviour, the Government’s ambition to reach an 80 per cent employment rate – and ‘Get Britain Working’ – remains in reach: halving the disability employment gap would take the Government more than halfway towards meeting its 80 per cent employment rate target. The policies set out in this report offer a practical way forward, one that shares responsibility between the state, employers and workers, to give disabled people a fair chance to find and stay in work.