Self-Employed Sick Pay: How to Get Paid on Sick Days

September 30, 2019

Self-employed sick pay is a sore subject for many small business owners, but there are ways to protect yourself. RS Accountancy explains the steps you can take. 

Those familiar with traditional employment in Britain will be aware of Statutory Sick Pay — or SSP. In short, if you are unwell and cannot work, you are entitled to your wages despite not providing your employer with the services and skills you’ve been hired for. Sick pay exists to protect individuals from financial difficulties following times of illness. 

However, this is only a protective measure for those under contract employment with a business. Self-employed sick pay is very different and, indeed, virtually non-existent. While it is possible to arrange terms with a business you work with if you provide exclusive services, similar to a contracted employee, this circumstance is highly unlikely. For most self-employed individuals, work is carried out for a variety of clients and customers, none of whom will offer you payment if you are unable to provide them with the products or services they require. 

If you are a self-employed plumber, for example, and can’t make it over to fix a broken boiler because you are sick, your customer isn’t going to just pay you anyway. So what do you do? Without protection, you could face serious financial problems in the event of sickness, but since you can’t claim actual self-employed sick pay, how do you maintain income?

Increase Your Hourly Wage

The average number of sick days in the UK per person is 5.6 per year. Essentially, this means you are probably going to miss six days of income to things like colds and migraines, etc. That equates to roughly 2.5% of your annual income. 

While 2.5% doesn’t sound like a lot, it can make a very serious dent in your earnings. With the average self-employed income being £33,000 per year, a 2.5% loss of that income is over £800. Ask yourself, can you afford to lose £800 a year?

Probably not. 

The way to protect yourself against sick days is not to work yourself into the ground avoiding them but to instead secure more income to cover your losses. If you increase your hourly rate by 2.5%, you can stabilise your income in the event of sickness. 2.5% might take a huge chunk out of annual income, but when applied to hourly rates, it is unlikely to be a large enough increase to deter customers from using your services. 

There were 253 working days in 2018. If you were to work a traditional eight-hour day and earned an average of £33,000, you’d be looking at an hourly rate of £16.30 an hour. Add an extra 40p on that to cover your potential sick days and you’ll earn the same per annum, but you’ll have covered money lost to sick days. 

Need help figuring out the best way to protect your income from sick days? Our accountants from Leeds can support your goals!

Obtain Self-Employed Sick Pay Insurance

Self-employed sick pay insurance, otherwise known as Income Protection Insurance, can be an important way of securing income in the event of long-term illness. Payments come in either as monthly instalments or a lump sum if you face an injury or recovery period. 

The concept behind self-employed sick pay insurance is simple. While you work, you pay monthly fees to an insurance provider. In the event of sickness or injury, they’ll then pay you the amount you would have been earning if you hadn’t fallen ill. 

For self-employed individuals, this can be an essential lifeline in the event of significant sickness that takes you out of work for a long period. Without it, your only other recourse is financial aid from the government in the form of Universal Credit or ESA — the latter of which we will discuss in the next section of this blog. The problem with government support is that it is financially limited. While it provides you with money that you can live on, it may be significantly lower than your current levels of income. For example, ESA payments start at £73 a week and are capped at just below £112. If you have dependants, mortgage payments or other important bills to pay, this is unlikely to support your current lifestyle. Self-employed sick pay insurance protects you from having to make major changes to remain financially stable. 

Claim Employment and Support Allowance

In the most serious situations, you may be able to secure income support from the government in the form of Employment and Support Allowance — or ESA. 

ESA has been established to provide financial assistance to workers who are unable to continue work or require aid in getting back into work. If you don’t have income protection insurance, this is essential. 

To qualify for ESA, you must have had both recent self-employment and contributed a sufficient amount of National Insurance Tax in the previous two to three years. Claiming ESA is a long and drawn-out process, so it should only be considered as a form of self-employed sick pay for those who are aware that they are going to unwell for a considerable amount of time and have evidence from medical practitioners to support your claim. 

It’s important to note that you cannot apply for ESA if you also have another form of employment that is providing you with sick pay. 

Concerned about financial stability without self-employed sick pay? Get in touch with our online chartered accountants today!

0113 337 2130

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