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), except if you’re ill or self-isolating and unable to work because of coronavirus, in which case you can claim from the first day of illness or self-isolation (see below)
- earn an average of at least £120 per week
SSP is paid at a rate of at least £96.35 per week; the exact amount paid depends on your employment contract. Payments usually begin from the fourth day of illness but this timescale has been revised during the coronavirus pandemic (see below).
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.
Note that a few of the above rules have been temporarily altered as a result of the coronavirus crisis (see below).
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 £59.20 a week|
|Over 25 while your claim is being assessed||up to £74.70 a week|
|In the “work-related activity” group (deemed to be fit enough able to get back into work)||up to £74.70 a week|
|In the “support group” (deemed not fit enough to get back into work)||up to £114.10 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.
Claiming Statutory Sick Pay during the coronavirus pandemic
The type of sick pay you can claim to cover illness because of coronavirus depends on your business type. Most limited company directors, who are employees of their own company, will be able to claim Statutory Sick Pay (SSP). In light of the coronavirus crisis, there are a few temporary changes to claiming and paying out SSP that you should be aware of. The arrangements are:
- If you or your employees can’t work as a result of either being ill or self-isolating for coronavirus for more than four days, payments will be made from day one rather than from the usual fourth day of illness.
- From 13th March 2020 you can start paying SSP from the first day an employee is off but would normally work, called a ‘qualifying day’, as long as they're off for at least four days in a row.
- You and your employees will be eligible to receive SSP if you or they are staying at home on government advice, not just if you or they are unwell.
- If you have fewer than 250 employees, you will be able to reclaim SSP for employees unable to work because of coronavirus. The refund will be for up to two weeks per employee.
- If you require your employees to provide evidence that they need to stay at home due to coronavirus, they will be able to get an isolation note from the NHS 111 Online service instead of having to get a fit note from their doctor.
If an employee was off sick or self-isolating because of coronavirus before 13th March 2020, you start paying SSP from the fourth qualifying day. However, if an employee was self-isolating before 13th March because someone else in their household had symptoms, they will not qualify for SSP.
Claiming benefits if you’re self-employed and don’t qualify for SSP during the coronavirus pandemic
As well as the Self-employment Income Support scheme, in a bid to help self-employed workers who are unable to work because they have been forced to self-isolate or have become ill because of coronavirus, the government announced that Universal Credit will be available at the same rate as SSP (£96.35 per week). You can find out if you’re eligible for this support and how to apply for it on the Universal Credit section of the government’s website.
ESA is intended to provide financial assistance to people who have difficulty working because of a disability or longer-term illness than coronavirus. However, if you are an existing ESA claimant it will continue to be available as well as or instead of Universal Credit.
The government has also introduced some short-term arrangements for claimants of Universal Credit and ESA during the coronavirus pandemic. Under these arrangements, both new and existing claimants:
- will receive payments from day one, rather than waiting the usual seven days
- will not be required to produce a fit note
- will not need to attend reassessments and will continue to receive their payments while their assessment is rearranged
- will not be required to attend a face-to-face assessment (instead, they should call the Universal Credit helpline for more information)
The minimum income floor, which is an assumed level of income used to work out your Universal Credit payments, will not apply during the time that claimants are affected.
You can find out more about the support available for small businesses during the coronavirus pandemic on our small business coronavirus support hub.
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.