Guide to sick pay for self-employed business owners and limited company directors
It’s inevitable that at some point in your self-employed career you will, unfortunately, be unable to work as a result of illness. This guide highlights the help that’s available from the government and suggests what you can do to prepare your business for periods when you might be unwell.
Are self-employed business owners and limited company directors entitled to sick pay?
Your entitlement to claim any form of sick pay from the government depends on your business type:
Limited company directors
Employed workers, including limited company directors who are employees of their own company, are entitled to claim Statutory Sick Pay (SSP) to cover periods of illness. In order to qualify for SSP you must:
- have been ill for at least four days in a row (including non-working days)
- earn an average of at least £123 per week
SSP is paid at a rate of at least £99.35 per week; the exact amount paid depends on your employment contract. Payments usually begin from the fourth day of illness.
Sole traders and partners in partnerships
Sole traders and partners in a partnership are not eligible to claim SSP, but there is another way to claim support from the government: applying for the Employment and Support Allowance (ESA).
Employment and Support Allowance (ESA) for self-employed business owners
Employment and Support Allowance (ESA) is a weekly benefit payment that’s designed to help you make ends meet until you’re fit enough to return to work if you’re unwell or if you have an illness or disability that restricts the hours you can 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 statutory sick pay or statutory maternity pay 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 - National Insurance credits also count towards this.
There are three different types of ESA that you might qualify for, and how you apply for these varies.
‘New Style’ ESA
The majority of new claims are for ‘New Style’ ESA. In order to qualify, you need to have made sufficient National Insurance contributions and to either have worked as an employee or been self-employed over the last two to three years. If you’re unsure about whether you’ve made sufficient contributions, you can check your National Insurance record. If there are gaps in your record that could mean you have not made enough contributions, you might be able to purchase National Insurance credits to make up the deficit.
To make a claim for ‘New Style’ ESA you need to call the Universal Credit helpline to make an appointment with a work coach and fill out the claim form. The government states that your appointment will usually be within 10 days of your request at your nearest job centre or at your home if you’re unable to travel. You need to have a few things to take to the appointment:
- your completed ‘New Style’ ESA claim form
- a fit note from your doctor (this is sometimes referred to as a ‘sick note’ or ‘doctor’s line’)
- proof of your identity
- proof of address
- proof of any pension income you receive
- proof of any health insurance payments you receive
You don’t need the fit note from your doctor straight away as you can self-certify for the first seven days.
It’s also worth noting that you can’t claim ‘New Style’ ESA if you’ve received or were eligible to receive the severe disability premium within the last month or if you are already claiming Statutory Sick Pay, Statutory Maternity Pay or Jobseeker’s Allowance. If you’re wondering about Statutory Maternity Pay, check our guide for self-employed mums.
If you were eligible to receive the severe disability premium within the last month, and therefore not eligible to claim ‘New Style’ ESA, you may still be able to claim contribution-based ESA. To be eligible, you need to have been employed or self-employed and made sufficient National Insurance contributions within the last two to three years or have sufficient National Insurance credits.
To make a claim or to find out more about contribution-based ESA, call Jobcentre Plus on 0800 169 0350 and fill in the relevant claim form.
If you haven’t paid enough National Insurance contributions to qualify for either of the above, you may be able to claim income-related ESA. However, you won’t be able to do so if you have savings or investments worth over £16,000.
To make a claim or to find out more about income-related ESA, call Jobcentre Plus on 0800 169 0350 and fill in the relevant claim form.
How much is ESA?
For ‘New Style’ and contribution-based ESA, the amount you receive depends on factors like the progress of your application, your age and whether or not you’ll be able to make enough of a recovery from your illness to get back into work. The amount you have in savings won’t affect ‘New Style’ or ‘contribution-based’ claims but household income and savings of over £6,000 can affect income-based ESA.
The amount you receive will also depend on your age, the status of your assessment and whether you fall into the ‘work-related activity’ or ‘support’ group after your assessment:
|Status||Amount you can claim||Under 25 while your claim is being assessed||up to £61.05 a week|
|Over 25 while your claim is being assessed||up to £77 a week|
|In the 'work-related activity' group (deemed to be fit enough able to get back into work)||up to £77.00 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.
Can you still work while claiming ESA?
As a general rule, you can still work up to 16 hours and earn up to £143 per week while claiming ESA. Some work is also classed as ‘permitted work’, which you can continue while still receiving payments. For more information on working while you claim ESA, take a look at the government’s guidance on ‘permitted work’.
If you still need to work while claiming ESA, or if you’re unsure that the work you want to continue is classed as permitted work, you should call the ESA helpline and complete the permitted work form.
Will sick pay support from the government cover your cashflow?
Having an accurate picture of the money flowing in and out of your business makes it easier to see the impact of any time you need to take off. FreeAgent’s Cashflow feature can help you by forecasting the money coming in and going out of your business across a 90-day window to provide a measure of business health and to show you a projected future balance.
If you’re looking for a cashflow projection that covers a longer period of time, following the steps in our guide to making a cashflow forecast can help you to understand the long-term financial impact of being unable to work.