11.6 Incapacity - Comparison of SRCA with the 1971 Act

The concept of incapacity for work for compensation purposes has historically been one of an injury diminishing or removing the worker's power to earn wages in some suitable employment.

Under the 1971 Act, weekly payments for incapacity were made at a sick leave rate of pay for a period, and thereafter at statutory rates. This was not always equitable in terms of an income maintenance concept because the statutory rate of compensation did not maintain income in any real sense.

In considering levels of incapacity payments for the 1988 legislation, the following points were considered:

• income replacement for compensable incapacity can be calculated having regard to a number of possible bases, e.g. flat rate, a flat rate with an allowance for dependants, earnings-related base, or a combination of each
• an earnings-related base is a more appropriate one for compensation for the entire period of incapacity as it is related to the loss suffered. It also enables injured employees to maintain living standards and financial commitments
• introduction of a benefit ceiling in certain cases would guard against the possibility of unlimited liability in an exceptional case
• some low income earners could be disadvantaged as they are less able than others to tolerate a proportional loss of income. Introduction of a variable floor could cater for this problem.

In the 1988 Act, the concept of total and partial incapacity (as it appeared in the 1971 Act), was removed. A member's loss of earning capacity (i.e. incapacity) is now measured by taking the Normal Weekly Earnings and subtracting what he or she is able to earn in suitable employment.