There are many uncertainties when it comes to owning a small business and the financial side of things can seem daunting. Our guide looks at entitlement to self employed sick pay and what can be claimed.
No one is invincible and sickness sometimes sneaks up when we least expect it. Sick days happen to us all but they can impact the self employed more severely. Small businesses typically operate with minimal staff so any time off can mean the business has to cease operating in the interim.
Our guide covers everything you need to know as a self employed business owner and what you can and cannot claim when off sick.
Can Self Employed Claim Sick Pay?
Statutory Sick Pay is paid by an employer when an employee is sick. This means you cannot claim SSP when you are self employed.
When an employee needs time off sick, their employer pays them SSP for this period. However, generally speaking, self employed business owners do not have employers.
This is, unfortunately, one of the downsides of working for yourself so it is important to be aware of the facts. Most partnerships and sole traders fall into this category and cannot claim SSP.
An exception to the rule concerning SSP comes with those who are operating as a limited company director. Within this business structure, SSP can be claimed because you are classed as an employee.
However, this money comes from company funds and cannot be reclaimed from the government.
Sick Pay for Company Directors
Company directors are regarded as employees of their business and therefore have the right to claim sick pay.
The SSP rate that directors can claim is the same as other employees which is £99.35 per week (as of April 2022). The normal terms apply which means you cannot claim SSP until you have reached day 4 of your sick leave.
he three days leading up to this are known as waiting days and the days after are called qualifying days.
Sick Pay for Sole Traders & Partners
Sole traders and partners are not entitled to SSP but there are other benefits they can look into. One benefit that can be accessed by those not entitled to SSP is Employment and Support Allowance (ESA).
This can be used in the case of long term illness and disability. There are certain restrictions in place including:
- Being aged 16 and over.
- Residing in England, Wales, or Scotland.
- Not already in receipt of Job Seeker’s Allowance (JSA).
- Paying over the threshold of National Insurance contributions.
About Employment & Support Allowance (ESA)
Employment and Support Allowance (ESA) is a benefit that can be paid weekly for self employed business owners who cannot claim SSP.
Criteria For ESA
There are strict criteria that must be met to be eligible for ESA and you need to meet all of them.
- Be under state pension age.
- Have an illness or disability that prevents you from working.
- You aren’t in receipt of either SSP or SMP through an employer.
- You aren’t receiving Job Seekers Allowance.
- You have paid enough National Insurance or Credits to qualify.
There are different forms of ESA that you can claim which are detailed below.
Find out about the claims process for ESA on the UK Gov website.
New Style ESA
To be eligible for this New Style ESA, you will need to check your National Insurance contributions and make sure you have paid enough.
It is possible to purchase credits if you fall below the threshold required. You also need to have been self employed or an employee over the last 2 to 3 years.
To set the process in motion, you can call Universal Credit.
Checklist For New Style ESA Appointment
There are things you will need to have on you when you attend your New Style ESA appointment. These appointments usually take place at your local job centre but home visits can also be arranged.
For your appointment slot you will require:
- Your completed claim form.
- A doctor’s sick note (if you have been off more than 7 days)
- I.D such as a driving licence or passport.
- A letter containing proof of address.
- Proof of any other income such as pension schemes or disability.
Contribution Based ESA
For those who cannot claim for the New Style ESA, there is always the option of Contribution Based instead.
Self employed individuals who are already in receipt of the severe disability premium within the last month can apply. You still need to have made the required amount of National Insurance contributions or have credits.
Claimants must also have been self employed or employed within the last 3 years. You can request a claim form by ringing your local job centre.
Income Related ESA
There are still options open to those who haven’t made enough National Insurance contributions including Income Related ESA.
Again, you can claim using a form from your local job centre but there are some instances when you may not be eligible. This includes if you have savings or investments over £16,000 as this means you have over the threshold to be eligible to claim.
How Much Does ESA Pay?
How much ESA will pay depends on your situation and which type of ESA you have applied for.
Some claims will be dependent on your income, savings, age and how long you will be off work. It also depends on which stage your claim is at. Below are the rates of ESA for the New Style and Contribution Based ESA claims.
When you claim initially you will typically receive:
- £74.35 each week (aged 25 or over)
- £58.90 each week (aged under 25)
After three months, your claim will be reassessed and you will then receive either:
- up to £73.10 a week (if you’re able to go back to work)
- up to £111.65 a week (if you’re not able to go back to work)
In certain situations, you can be working up to 16 hours per week while also receiving ESA. There is more information on this on the GOV.UK factsheet titled Permitted Work (26th July 2022).
Sickness Insurance For Self Employed
An option open to ensure cover for self employed sick pay is to take out sickness insurance.
This gives business owners the peace of mind that there is financial aid in place should time off sick be required. Such schemes normally involve paying a monthly charge which will then offer you protection should you fall ill. The amount you will receive will be dependent on your average income and then you will receive up to 60% of this average each month.
This type of income protection can financially assist small businesses when they have to close temporarily. It’s important to shop around for a good quote as some are more expensive than others. Be sure to read the terms and conditions closely too so that there are no nasty surprises along the way.
Further Reading: How to deal with not getting paid when self employed – a guide on how to get those late invoices settled!
