Sick Pay for the Self-Employed: A Comprehensive Guide to Your Entitlements and Benefits

By March 12, 2024 Insights

Understanding Sick Pay for the Self-Employed

As a self-employed individual, navigating periods of illness can be challenging, given that traditional employee benefits like sick pay are typically not applicable. However, knowing your entitlements and the aid available from the government can make all the difference when you’re unable to work due to health issues. This guide aims to provide a comprehensive understanding of the options available to you, helping you safeguard your income during such times.

Statutory Sick Pay (SSP): What You Need to Know

Your entitlement to sick pay heavily depends on your business type. Let’s examine the eligibility criteria for different types of business owners:

Limited Company Directors

As a director of a limited company, you are considered an employee of your own company and thus qualify for Statutory Sick Pay (SSP) from your company in case of illness. To qualify for SSP, you must:

  • Have been ill for at least four consecutive days (including non-working days)
  • Earn an average of at least the Lower Earnings Limit, currently standing at £123 per week

From 10th April 2023, SSP is paid at a rate of at least £109.40 per week, depending on your employment contract. Payments usually commence from the fourth day of illness.

Sole Traders and Partners in Partnerships

Sole traders and partners in a partnership do not qualify for SSP. However, they can apply for the Employment and Support Allowance (ESA).

Note that employers, including limited company directors, cannot reclaim SSP from the government. However, they can apply for the Employment and Support Allowance (ESA) for additional government support.

Exploring the Employment and Support Allowance (ESA)

Employment and Support Allowance (ESA) is a fortnightly benefit payment designed to provide financial aid during periods of illness or disability that affect your ability to work. You can claim for ESA if you meet all of the following criteria:

  • You are under the state pension age.
  • You have a disability or health condition that affects how much you can work.
  • You are not currently claiming SSP through an employer.
  • You are not currently claiming Jobseekers’ Allowance (JSA).
  • You have paid enough National Insurance contributions in the last two to three years.

ESA is designed to help you until you’re fit enough to return to work. It provides a buffer against the financial challenges that may arise during periods of illness or injury, ensuring peace of mind during recovery.

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‘New Style’ ESA: Criteria and Application Process

As of January 2021, all new claims will be for the ‘New Style’ ESA. To qualify for this, you must have been in employment or self-employment over the last two to three years and have made sufficient National Insurance contributions. If you’re unsure about your eligibility, you can check your National Insurance record online. Any gaps in your record could mean you’ve not made sufficient contributions, but you might have the option to purchase National Insurance credits to make up the shortfall.

You can apply for the ‘New Style’ ESA either online or by phone and you would need to provide:

  • Your National Insurance number
  • Your bank or building society account number and sort code
  • Your doctor’s name, address and telephone number
  • A fit note from your doctor, if you’ve not been able to work for more than seven days in a row
  • Details of your income
  • The date your Statutory Sick Pay ends, if you’re currently claiming it

Upon receipt of your application, the Department for Work and Pensions (DWP) will contact you within 10 working days to schedule an appointment, which will typically be conducted over the phone with a work coach from your local Jobcentre Plus office.

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ESA Amounts: How Much Can You Claim?

The actual amount you receive through ESA depends on various factors such as your age, the progress of your application, and your potential to recover and return to work. Importantly, the amount you have in savings will not affect your claim. Here are the typical amounts you can claim:

StatusAmount You Can Claim
Under 25 while your claim is being assessedUp to £67.20 a week
Over 25 while your claim is being assessedUp to £84.80 a week
In the ‘work-related activity’ group (deemed to be able to get back into work)Up to £84.80 a week
In the ‘support’ group (deemed not fit enough to get back into work)Up to £117.60 a week

If your claim is successful, payments will be made into your bank account every two weeks. The duration of the ESA varies; if you’re in the ‘work-related activity group’, ‘New Style’ ESA lasts for 365 days. If you’re in the ‘support’ group, there’s no time limit.

Can You Still Work While Claiming ESA?

Generally, you are allowed to work up to 16 hours and earn up to £152 per week while claiming ESA. Certain types of work are classified as ‘permitted work’, which you can continue to do while receiving ESA payments. For detailed guidance on working while you claim ESA, you should refer to the government’s ‘permitted work’ guidelines.

If you need to continue working while claiming ESA, or if you’re uncertain whether the work you wish to carry on is classified as permitted work, it would be advisable to call the ESA helpline and complete the permitted work form.

Managing Finances During Illness: Practical Tips for the Self-Employed

Having a financial plan in place can help you navigate through periods when illness prevents you from working. Here are some practical tips:

  • Emergency Fund: Aim to build an emergency fund that can cover your expenses for 3-6 months. This can be a lifesaver when you’re unable to generate income.
  • Insurance: Consider taking out income protection insurance, which can replace part of your income if you can’t work because of illness or disability.
  • Financial Review: Regularly review your finances to understand your spending patterns and identify potential areas where you can save money.
  • Professional Advice: Engage with a financial adviser or accountant who can provide advice tailored to your specific circumstances.

Beyond Sick Pay: Additional Support Systems for Self-Employed Individuals in Ill Health

While SSP and ESA are key financial support mechanisms during illness, there are other avenues worth exploring:

  • Universal Credit: Depending on your income and situation, you might be eligible for Universal Credit to help with living costs.
  • Disability Living Allowance or Personal Independence Payment: If you have a disability, you may qualify for the Disability Living Allowance (for those under 16) or the Personal Independence Payment (for those aged 16 and over).
  • Local Council Support: Some local councils offer schemes to help with emergency expenses. Contact your local council for details.
  • Charities and Non-Profit Organisations: There are numerous charities and non-profit organisations that provide financial assistance, counselling, and other support services for individuals facing health issues.</

Safeguarding Your Income During Health Challenges

Navigating through periods of illness can be daunting, particularly for self-employed individuals who rely on their ability to work to generate income. However, understanding your entitlements, such as Statutory Sick Pay and Employment and Support Allowance, can enable you to alleviate financial stress during such periods. Beyond these, keeping an eye on your financial health, considering insurance, and exploring various support systems can go a long way in ensuring your financial wellbeing. Remember, you’re not alone in this journey, and there’s a wealth of support available to help you weather the storm.

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