Claiming sick pay when self-employed: A guide for business owners

January 10, 2023

Being your own boss brings many benefits, as well as great freedom and flexibility. Despite the obvious advantages, there are a few drawbacks too with lack of employment rights.This is particularly true when it comes to the lack of sick pay for self-employed people. No matter how carefully you plan, illness or a serious health condition can strike when you least expect it, leaving you unable to work for a period of time.However, it’s not all doom and gloom. In this article, we’ll explain the benefits for the self-employed when sick, cover the lowdown on Employment Support Allowance and outline the steps you can take as a business owner to plan ahead for any periods of illness.

Can you claim Statutory Sick Pay when self-employed?

Statutory Sick Pay, or SSP for short, is a payment to employees when they are off sick for an extended period of time. The current rate of SSP is at least £99.35 per week for up to 28 weeks, with the exact amount depending on your employment contract. As well as being classed as an employee, you must also:

have already started work with an employer

earn an average of £120 per week before tax

have been unwell for at least 4 consecutive days, including non-working days

Whether Statutory Sick Pay for the self-employed is available depends on the legal structure of your business. Unfortunately, as a freelancer or sole trader, you can’t claim for many of the benefits that employees are entitled to, including SSP.

Self-employed sick pay as a company director

If you’re the director of a limited company and classed as an employee of your own small business, good news: you’ll be eligible to claim SSP, as you will have the same rights as employees of your business.You need to be earning an average of £120 per week before tax, as well as having been unwell for 4 consecutive days, including non-working days. Statutory Sick Pay usually starts from the 4th day of illness.

GOV.UK has an SSP calculator where you can check whether or not you are eligible and how much you can claim. However, different rules for calculating SSP eligibility apply to directors who are not paid contractually by a regular salary.

ESA benefit and the self-employed

While Statutory Sick Pay for the s elf-employed isn’t available if you’re working as a sole trader or freelancer, you may be eligible for Employment and Support Allowance (or ESA for short) if you have a disability or health condition that affects how much you can work.ESA is a weekly benefit payment that’s designed to provide you with financial support 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.As well as being available to those who are employed and the self-employed, if you’re unable to work, Employment Support Allowance will also provide you with help to get back into work.

Claiming ESA sickness benefit

You can apply for Employment and Support Allowance while self-employed 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 are able to work You are not currently claiming statutory sick pay or statutory maternity pay through an employer You are not currently claiming Jobseekers’ Allowance (JSA) Your National Insurance record shows you've paid enough National Insurance contributions in the last two to three years

You can check your National Insurance contributions to date online via the UK Government website. If there are gaps in your record, it may mean you haven’t made enough contributions. You may be able to purchase National Insurance Credits to make up any deficit.

Applications for ‘new style’ ESA benefit can be made either online at gov.uk or over the phone. Ahead of your application, you will need to have the following information to hand:

proof that you have limited capability for work (fit note) your National Insurance number bank or building society account number and sort code GP’s details income details if you’re working

According to Citizens Advice, the Department for Work and Pensions (DWP) might tell you that you should claim for Universal Credit too, but you don’t need to do this for ‘new style’ ESA.

Types of ESA benefit

Navigating through the benefits system can seem bewildering at times. You may hear terms such as ‘ESA Sick Pay’, as well as ‘income-based’ and ‘contribution-based’ ESA.‘Income-based’ and ‘contribution-based’ ESA are older types of Employment Support Allowance. While some people still receive these, it’s no longer possible to make new claims for these. Instead, the type of ESA benefit that most people claim is called New Style Employment and Support Allowance, or New Style ESA.

How much is ESA worth as self-employed sick pay?

For New Style ESA, the amount you receive depends on factors such as:

The progression of your application

Your age

Whether or not you’ll be able to make enough of a recovery from your illness to return to work

The amount you have in savings won’t affect New Style ESA, but if you have a private pension worth more than £85 per week, then this could affect how much you receive.If your claim takes longer than this to process, you will continue to get this rate until a decision is made or until your claim is due to end. The assessment rate is:

up to £61.05 a week if you’re aged under 25

up to £77.00 a week if you’re aged 25 or over

Once your assessment is complete, if you’re entitled to ESA benefit, you’ll be placed into one of two groups.

If you’ll be able to get back into work at some point in the future, you’ll be in the work-related activity group

If you won’t be able to get back into work, you’ll be in the support group

Payments for the two groups are as follows:

up to £77.00 a week if you’re in the work-related activity group

up to £117.60 a week if you’re in the support group

Once you’ve made your ESA claim, you’ll be told if you need to have a Work Capability Assessment. This assessment is used to determine if your illness or disability affects how much you can work. If you’re claiming both Universal Credit and ESA, you’ll only have one assessment.

Can you work and claim ESA?

You can generally continue to 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 to do while receiving ESA benefit payments. As the rules around this area can seem a bit complex, check out the government’s guidance on ‘permitted work’.

Personal Independence Payment

If you need extra help with your finances due to illness, disability or mental health, you can claim Personal Independence Payment, or PIP, on top of your ESA.

Income protection insurance

While state support, such as ESA benefit may provide a financial lifeline if you find yourself unable to work, the amount you receive may not be enough to cover all your bills and outgoings.Given applying for sickness benefit may be impossible when you’re self-employed, it may be a good option to take out insurance to protect your income should you fall ill. Income protection insurance is a policy that pays out should you find yourself unable to work due to either injury or illness.In general, income protection policies usually pay out on retirement, death or your return to work, although it is possible to find short-term policies valid for one or two years at a lower cost. The terms of these policies can vary, but you can expect to receive a proportion of your usual income.

Other forms of insurance for the self-employed

If you fall seriously ill, you may also be eligible to claim critical illness insurance. This policy can be taken out in combination with income protection insurance.In the event you’re unable to work, you may also want to consider mortgage protection insurance or life insurance. All of these can provide a financial lifeline and peace of mind that, should the worst happen, you’ll have the means to continue to pay your bills.

Caroline WireFreelance Copywriter