Do contractors get paid for sick leave?

Yesterday was a disappointing day for the umbrella company industry, due to only a tiny update from the government on its regulatory plan for an industry demanding more detail, so let’s look at an issue that can perk contractors up -- even when they’re not feeling very, well; perky.

I’m talking about sick pay and in particular I’ll answer the often-asked question, ‘Do contractors get sick pay?’ writes Shelley Ankers-Wainwright of umbrella company advisory SAW Consulting.

When you need sick pay…

Let’s start by acknowledging the obvious.

Everyone feels unwell at some stage in their lives, sometimes to the extent that they can’t work.

And taking time off work due to sickness impacts millions of people working for themselves in the UK.

At a time when you’re not feeling yourself, it can be confusing to understand if you are entitled to sick pay, known as Statutory Sick Pay or SSP.

The answer as to whether you qualify for SSP is that it depends on different factors, like how your business runs (if you’re not using an umbrella company), and what contracts you have in place.

What is Statutory Sick Pay (SSP)?

SSP is the minimum amount an employee must be paid by their employer if they can’t work for at least four consecutive days, due to sickness.

How much sick pay do employees get?

Employees (including of an umbrella company) are entitled to at least £116.75 a week, for up to 28 weeks, in the tax year 2024/25.

Some employees will pay above the required minimum if they have a sick pay scheme in place (also known as an occupational scheme).

All information should be outlined in the employment contract or employee handbook – ask your umbrella if you haven’t received this.

Who pays Statutory Sick Pay (SSP)?

The employer is legally obliged to pay employees SSP.

When does Statutory Sick Pay start?

SSP is granted from the fourth consecutive day of not working due to sickness. This day is known as a ‘qualifying day’. The first three days are called ‘waiting days’, where employees don’t usually receive SSP from their employer.

Is SSP taxable?

Yes. Employees are paid SSP as part of their salary, with Tax and National Insurance Contributions deducted.

It’s worth noting that those contractors or techies with more than one job can claim SSP from multiple employers.

Umbrella company sick pay

As referred to already, as employees of an umbrella company, umbrella workers qualify for SSP, along with other statutory employment rights, like holiday pay, employer pension contributions and maternity and paternity leave.

Getting sick pay as a contractor is one of the main benefits of working via an umbrella company as a professional who works different contracts on a temporary basis.

Limited company contractor sick pay

Sick pay is a little more complicated for contractors operating via their own limited company.

SSP for these ‘LTD’ contractors is quite different to employees and those operating via umbrella companies, where the payment is covered by the employer.

Contractors operating via their own limited company (also known as a Personal SERVICE Company) are self-employed, albeit they are also employees of their own company.

How much sick pay as a limited company in 2024-25?

If you fall ill as a limited company contractor, you can claim up to £116.75 a week from your business as statutory sick pay (SSP).

But be aware - you’re only able to receive SSP for a maximum of 28 weeks.

To be eligible, you must meet specific criteria:

• Off work more than four days

• Earn over £123 a week in salary -- not dividends.

To crunch the numbers further, you can use the government’s online sick pay calculator for employees.

Can contractors negotiate sick pay with a client?

As an IT contractor, you could attempt to negotiate contractor sick pay with clients into your contracts – but in so doing, you would need to very mindful of the rules on off-payroll working.

The OPW rules and IR35 determine if you’d effectively be an employee of the client without an intermediary – your limited company.

That’s why your access to (or even pursuit of) sick pay with a client would likely be problematic if you want to be outside IR35, i.e. not caught by the rules.

And it’s not just with sick pay. If you ask for any of the same rights as other employees of your client, any ensuing investigation by HMRC could determine that you or your client have been avoiding paying tax.

Consider income protection

Generally, limited company contractors consider other options. For example, you could take out specific insurance to provide you with the financial support you need if you fall ill and cannot work.

This insurance is known as income protection, but you’d need to refer to your specific policy to find out when the cover would begin to pay out, or in what circumstances -- and for how long.

Broadly speaking though, while you’re unable to work, you could receive monthly payments to help you cover some of your costs, such as rental/mortgage payments and utilities at home.

Sole trader sick pay

Sole traders don’t benefit from sick pay, as it is only for employees.

That said, if you want to start your technology business as a sole trader, other initiatives are available to sole traders who fall ill and cannot work.

The Employment and Support Allowance (ESA)

For example, the Employment and Support Allowance (ESA) is open to everyone (employed or self-employed).

The ESA can help with the cost of living for those unable to work.

The ESA currently pays an assessment rate for up to three months, at which point the person’s illness is reassessed and adjusted. For further information on the ESA, government guidance is available: https://www.gov.uk/employment-support-allowance