As a method to encourage vaccination, reduce the risks of transmission and resulting staff absence though isolation and to save the huge sick pay costs incurred by Morrisons, they have implemented a change to terms whereby they will not pay full sick pay to those staff who must self-isolate but who have chosen not to take the vaccine.
Of course, any employer considering such a regime must also factor in an individual assessment of cases to avoid disability discrimination of those who cannot take the vaccine for health reasons or even possible claims by staff of certain religions, who may refuse on religious grounds or who object on an established philosophical belief ground. All of these could be protected under the Equality Act 2010 or the Human Rights Act 1998.
Such policies are not, on the face of it, unlawful although employers do need to have in place a system to assess each case to avoid obvious, and the more obscure, potential claims.