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  • Sick Pay for Self-Employed Tradespeople – What Are You Entitled To?

    One disadvantage of taking control of your career and working for yourself is that you are not entitled to statutory sick pay from your employer if you are unable to work due to illness or accident.

    If self-employed professionals are unable to work, they will have to rely on their savings and/or take out suitable insurance, or they may have to seek other government benefits. Claiming for self-employed sick pay is not possible.

    sickness at work image

    Getting ill pay as a self-employed tradesperson is more difficult than getting sick pay from a contract job. There are, however, workarounds.

    This is why we have created this article, to help you, as a self-employed tradesperson, to know what you are entitled to and how to get this/apply for it.

    So, if you are sick of constantly worrying about being sick and can't afford to stay off, then we have created this article to help you know all about it.

    What is Sick Pay?

    The alarm goes off, and you roll over to get ready for work, but then... ugh. You simply cannot do it because you are ill. Have you ever had one of those days?

    Everyone, unfortunately, gets sick. Workers may be unable to work due to colds, the flu, or other medical difficulties. Some employers provide sick pay to their employees in certain conditions. What exactly is sick pay?

    Employees receive sick pay (also known as paid sick leave or paid sick days) when they are unable to work due to illness, injury, or disability. When an employee takes paid sick leave, they are paid their entire earnings or a portion of their wages while they are sick.

    So, what constitutes "sick time"? Although state laws and employer policies differ, eligible causes for sick pay may include:

    • Illness, injury, or other health issues
    • Preventative medical care
    • Medical evaluation
    • Treatment or care for physical or mental illnesses
    • Taking care of a sick or injured family member
    • Employers who provide sick leave to their employees may do so under a paid time off (PTO) policy. Employees can take paid time off for any purpose, such as sick leave or vacation, using their PTO.

    If you're an agency or casual worker who becomes unwell while on assignment, you may be eligible for SSP until the assignment is completed.

    You may be eligible for SSP until the conclusion of a future assignment if you've previously agreed to another one. You won't be eligible for SSP if you're not working when you become sick.

    You can still earn sick pay if you're on a zero-hours contract; just ask your boss for it. If they say no, inquire about their reasoning. If you're not satisfied with their explanation, you can call Citizens Advice.

    Some medical expenses incurred by a company on behalf of an employee are not considered sick pay. These payments consist of the following:

    • Workers' compensation payments for any on-the-job injury or illness developed as a result of the work environment Any disability retirement payment
    • Payments are provided for medical expenses under a medical plan or medical insurance.
    • Any payments made to an employee that is unrelated to his or her presence or absence (e.g., personal time off)

    However, if you do any of the following, you will not be eligible for SSP:

    • If you are self-employed
    • Been receiving SSP for the past 28 weeks (and the 28 weeks ended within the last eight weeks)
    • Statutory maternity pay or Maternity Allowance if they received Employment and Support Allowance (ESA) in the previous 12 weeks.
    • If you're pregnant, your baby is due in four weeks or less, and your condition is pregnancy-related, and you've had a baby in the last 14 weeks (or the last 18 weeks if your baby was born over four weeks early)
    • Are serving in the military
    • If you are in legal custody (detained either by the police or in prison)

    Are Self-Employed Tradespeople Entitled to Sick Pay?

    It's unavoidable that you will be unable to work due to illness at some point throughout your self-employed profession. This book explains how the government can assist you and what you can do to prepare your business for periods when you may be ill.

    There are many options for self-employed tradespeople when it comes to sick pay. However, it is more complicated to get as the SSP does not cover sick pay for the self-employed. Here we will go through what sick pay self-employed tradespeople are entitled to.

    tradesman working image

    While the SSP is not available to self-employed people, there is help in the form of the Employment and Support Allowance (ESA).

    Previously, you could apply for one of three varieties of ESA; currently, you can only apply for the 'new style' ESA, which is not means-tested but is taxable. It can also be used in conjunction with Universal Credit.

    SSP is a payment made to employees who are out of work for an extended period due to illness. The legal structure of a firm determines whether a self-employed person is eligible for SSP.

    Because you are an employee of your limited company, if you are a director of a limited company, this means you're eligible for the same SPP benefits as your employees.

    If you work as a sole trader or in a partnership, you won't be eligible for SSP, but you may be eligible for other self-employed illness benefits.

    While the government has committed to reimburse the first two weeks of any statutory sick pay (SSP) owed to employees impacted by the coronavirus, self-employed people who aren't eligible for SSP will be out of luck.

    Check your eligibility first, as some gig workers, agency employees, and those on zero-hour contracts may be.

    Your or your partner's savings or income will have no bearing on the amount you get, but you must have paid enough national insurance contributions in the previous two tax years to qualify for national insurance credits.

    Within three weeks, you should get your first payment, which will be up to £74.70 per week (less if you receive private pension payments worth more than £85 per week).

    What Sick Pay Benefits Can Self-Employed Tradespeople Benefit From?

    When you're a self-employed tradesman, every penny counts since you never know if you'll have a job tomorrow. So, it's important to understand the facts about self-employment perks and what to look out for in the future.

    Here's your guide to UK benefits, from Universal Credit and Pension Credit to the New Enterprise Allowance for businesses.

    New Enterprise Allowance

    The New Enterprise Allowance is a support programme for would-be entrepreneurs aged 18 and up who are currently receiving JSA, Universal Credit, or Employment and Support Allowance, or who are on Income Support and are a lone parent, sick, or disabled.

    The NEA assists people in these groups who desire to start their own business with both practical and financial assistance. It combines business coaching, a weekly allowance, and company financing into one package.

    You'll be assigned a business mentor once you've joined the programme. This person will assist you in developing your business strategy and assisting you in converting your concept into a viable, revenue-generating operation.

    During your first several months of trading, your mentor will stick with you and provide ongoing support.

    You will be provided access to financial help once your business plan has been approved. This is a weekly allowance as well as a start-up loan.

    After your business plan is approved, you may be eligible for a weekly allowance of up to £1,274 for 26 weeks. You can also apply for a loan to assist with the costs of beginning a business.

    If you are found to be eligible for ESA, you will be assigned to one of two categories. The work-related activity group pays up to £74.40 per week for individuals who can return to wok in the future, while the support group pays £114.10 per week for those who are unable to return to work.

    Every two weeks, the money will be deposited directly into your bank account.

    The NEA is applied for through your local JobCentre Plus. Find out how to put your name forward by speaking with your JobCentre Plus work coach.

    Universal Credit

    Universal Credit is a monthly payment (or twice a month for some persons in Scotland) that is meant to assist low-income and unemployed people with living expenses. It will progressively replace six existing benefits across the United Kingdom.

    If you're on a low income or currently unemployed, you're 18 or older, either you or your partner is under the State Pension Credit qualifying age, you and your partner have combined savings of less than £16,000, and you live in the UK, you may be eligible for Universal Credit.

    money in piggybank image

    Self-employed people can apply for Universal Credit if they meet the criteria outlined above. The method for applying for Universal Credit, as well as the amount you may be eligible for, is different.

    In the past, all self-employed people who were unable to work or were forced to cut their hours and earnings may have been eligible for ESA or Income Support.

    The new Universal Credit programme, on the other hand, has flipped the old benefits system on its head. It's being phased in across the country, and the benefits that you could previously claim independently have been merged under the umbrella of 'Universal Credit.'

    The following items are now included in Universal Credit payments:

    • Housing Assistance
    • Tax Credit for Children
    • Tax Credit for Employees
    • monetary assistance
    • Allowance for Job Seekers
    • Allowance for Work and Support

    It's critical to remember that Universal Credit is only available to "gainfully self-employed" people. This implies that self-employment is your primary source of income and that you are earning money from it. Your work must also be "organised, developed, and consistent," as well as profitable.

    Even if they pay themselves through PAYE, self-employed people (including company directors) must record their earnings after each assessment period, which is usually monthly.

    You must also disclose your costs each period, including what you spent the money on, as well as tax, NI, and pension payments. If you are found to be gainfully self-employed, you will not be required to look for other work. Instead, you may concentrate on growing your company.

    Self-employed people (including business directors) must record their earnings after each assessment period, which is often monthly. Each period, you must also disclose your expenses, including what you spent the money on, as well as tax, National Insurance, and pension payments.

    You will not have to look for additional jobs if you are found to be gainfully self-employed. You can concentrate on growing your company instead.

    The first payment from Universal Credit can take up to 5 weeks after you apply. Claimants have taken longer than five weeks to get their reimbursements in some regrettable circumstances while the scheme is still in its early stages.

    Jobseeker’s Allowance (JSA)

    Self-employed Jobseeker's Allowance (JSA) is designed to help people who are unemployed or on a low income. It is feasible to claim JSA after being self-employed; all you need to know is which category you fit into and how to apply.

    JSAs are divided into three categories: 'new style,' contribution-based, and income-based. You won't be eligible for 'new style' or contribution-based JSA if you're self-employed because this kind is dependent on your Class 1 National Insurance Contributions (NICs).

    You don't have to pay for these if you're self-employed. There are a few extremely specific exceptions to this rule; to find out if you are eligible for Job Seeker's Allowance, go to the government's JSA eligibility page.

    You may, however, be eligible for JSA based on your income. This is a means-tested benefit that is particularly beneficial to low-income self-employed workers.

    Your eligibility will be determined by your age, immigration, and educational status (part-time students are often ineligible), and, most importantly, the number of hours you work per week. You might be qualified if it's less than 16.

    Even if this is a self-employed jobseeker's benefit, remember that if you have a spouse, they must work less than 24 hours per week on average for you to qualify. It is determined by your age, earnings, and savings.

    To figure out how much you'll get, go to the government's website, and utilise the benefits calculator.

    Every two weeks, the following JSA amounts are normally paid:

    • Up to £57.90 (if you’re between the ages of 18 and 24)
    • (If you’re 25 or older, you can get up to £73.10)
    • If you’re a couple over the age of 18, you may save up to £114.85.

    You may have to wait up to 7 days for your JSA to begin and up to 2 weeks for your first payment after that. It's possible that your first payment won't be for the full amount.

    Following your first payment, payments will be made every two weeks and will be in full.

    Employment and Support Allowance

    If you're unwell or have an illness or disability that limits the hours you can work, Employment and Support Allowance (ESA) is a weekly benefit payment designed to help you make ends meet until you're fit enough to return to work.

    If you meet all of the following criteria, you can apply for ESA:

    workplace support image
    • You are not yet eligible for a pension.
    • You have a handicap or a medical condition that limits the amount of work you can do.
    • You are presently not receiving statutory sick pay or maternity pay from your company.
    • You are not receiving Jobseekers' Allowance at this time (JSA).
    • You've paid enough National Insurance contributions in the last two to three years, including National Insurance credits.

    While claiming ESA, you can generally work up to 16 hours per week and earn up to £143 per week. Some jobs are classified as 'permitted work,' which means you can keep working while still getting paid.

    Take a look at the government's instructions on 'permitted work' for further information on working while claiming ESA.

    If you still need to work while receiving ESA, or if you're not sure if the job you want to keep is approved work, call the ESA helpdesk and fill out the permitted work form.

    New Style (ESA)

    New claims for 'New Style' ESA account for the majority of new claims. To be eligible, you must have paid enough National Insurance contributions and have worked as an employee or self-employed for the previous two to three years.

    You can check your National Insurance record if you're not sure if you've paid enough contributions. If you have gaps in your record that indicate you have not paid enough contributions, you may be able to make up the difference by purchasing National Insurance credits.

    To apply for the 'New Style' ESA, call the Universal Credit helpdesk and schedule an appointment with a work coach, as well as complete the claim form.

    Your appointment will normally be made within ten days of your request at your nearest work centre or your house if you are unable to travel, according to the government. To bring to the appointment, you'll need the following items:

    • A fit letter from your doctor (also known as a 'sick note' or 'doctor's line') your completed 'New Style' ESA claim form
    • Evidence of your identity
    • Evidence of residence
    • You must provide proof of any pension income you receive.
    • A copy of any healthcare payments you've received

    Contribution-based ESA

    If you were eligible for the severe disability premium in the previous month and hence were unable to claim 'New Style' ESA, you may still be eligible for contribution-based ESA.

    To be eligible, you must have worked or been self-employed for the past two to three years and paid enough National Insurance contributions or have enough National Insurance credits.

    Income-Related ESA

    You may be able to claim income-related ESA if you haven't paid enough National Insurance contributions to qualify for either of the above. If you have more than £16,000 in savings or investments, you won't be allowed to do so.

    For self-employed people who don't have sick pay or enough funds to meet their financial obligations, government benefits aren't the only option.

    There are two essential insurance products for self-employed workers that can provide financial assistance if they are unable to work due to illness or injury.

    Income Protection Insurance

    Self-employed Income Protection is a type of insurance that protects your earnings if you are unable to work due to an injury or illness. You can receive up to 70% of your typical salary in the form of monthly benefits with this sort of insurance.

    Income Protection Insurance, unlike Critical Illness Insurance, will cover any health problems you may have as long as they keep you from working.

    Different definitions of incapacity are used to change the comprehensiveness of your policy's cover, and different incapacity definitions are used to evaluate whether you are allowed to claim on your policy.

    Policyholders can also choose how long their claims can last. If you choose Long Term Income Protection, you can collect these benefits until you reach retirement age, whereas Short Term Income Protection only pays out for up to two years.

    Make sure you have a job-specific definition of incapacity, which means you'll be eligible to file a claim as long as your health problem prohibits you from working in your current position.

    Critical Illness Insurance

    When a policyholder is diagnosed with a critical illness, critical illness insurance pays out a lump payment.

    health support image

    Insurers provide a list of conditions with the agreement that they will pay you a lump payment if you are diagnosed with one of the conditions on the list.

    The number of conditions covered by insurers can range from 40 to 100, but the quality of a policy is determined more by the definitions of severe illnesses covered by the insurance than by the number.

    One of the major flaws of Critical Illness Cover is that it only covers a limited number of catastrophic illnesses, leaving you vulnerable to a wide range of illnesses and accidents that could keep you from working.

    How To Claim for Self-Employed Sick Pay

    So, now you know all the benefits you can apply for as a self-employed tradesperson, now it is time to learn how you apply for sick pay. So, if you are a self-employed tradesperson wanting to apply for sick pay, here is how you do it.

    You must first complete the claim form (called the ESA1, or NSESAF1). Most people would also have to fill out a "capacity for work questionnaire" (called ESA50), which includes questions on their health and abilities, as well as undergo a medical examination with a healthcare provider.

    If you are currently receiving HM Revenue & Customs tax credits and apply for universal credit, your tax credits will be terminated immediately, even if you are not qualified for UC.

    Employment and Support Allowance (ESA)

    If you're under the age of 65 and have a disability or health condition that limits how much you can work, you can apply for a 'new style' Employment and Support Allowance (ESA).

    offering support image

    You'll also require both:

    • Worked as an employee or self-employed
    • Made enough National Insurance contributions in the last 2 to 3 years - National Insurance credits are also taken into account
    • Look for any gaps in your National Insurance record

    You may be eligible for Universal Credit in addition to or instead of 'new style ESA. Housing and childcare expenditures, for example, may be covered by Universal Credit.

    The most common sort of ESA is referred to as 'new style' ESA. Some people still receive 'income-based ESA' and 'contribution-based ESA,' which are two different types of ESA.

    If you already have a contribution-based ESA, you may be able to switch to an income-based ESA. You may obtain extra money as a result of this.

    You can't file a new contribution-based ESA claim. You can apply for a new style ESA if you've been receiving a severe disability premium (SDP). Speak to an adviser if you should have been receiving an SDP, but it is not included in your benefits.

    In 2021, you must have met National Insurance requirements for two tax years (2018-19 and 2019-20). GOV. The UK allows you to check your National Insurance record. It will tell you whether you have made a 'full year' of contributions and whether they came from work, self-employment, or National Insurance credits.

    You may have received National Insurance credits to make up for missed payments. For instance, if you were receiving benefits because you were unable to work or because you were unwell.

    You'll need a full year of contributions for both tax years to meet the National Insurance requirements. You must have one of the following:

    • Both years of job and years of self-employment
    • One year of job or self-employment
    • Another year of National Insurance credits

    You should still apply for a new style ESA if you don't think you meet the National Insurance standards or if you can't check your National Insurance record. As part of your application, the DWP will review your National Insurance record.

    Even if you don't qualify for the new style ESA, if you have a limited ability to work, you may be eligible for National Insurance credits. These NI credits may be used to help you qualify for ESA in the future. They also count against your State Pension contributions.

    Jobseekers Allowance (JSA)

    To assist you in your job search, you can apply for a 'new style' Jobseeker's Allowance (JSA). You can no longer apply for JSA based on contributions or income.

    If you're presently receiving contribution-based or income-based JSA, you'll continue to receive payments as long as you're eligible. You can fill out an application on the government's website.

    Universal Credit

    Your UC payments will be based on your wages as well as if you have children, a disability or health condition that prevents you from working, or if you require assistance with rent payments. If you reside with someone, their income and savings will be considered as well.

    financial support image

    To figure out how much you'll get, go to the government's website, and utilise the benefits calculator. More information on how to claim Universal Credit as a self-employed person can be found on the government website.

    Conclusion

    Overall, there are many ways to claim sick pay when you are self-employed. However, it is not as easy as applying when you have a contract and are promised sick pay when it is needed.

    More than likely, when you are self-employed, you can apply for sick pay by benefits schemes. However, they do take a few weeks to go through.

    Income Protection is mostly recommended to replace a lack of sick pay to secure your income while you are unable to work. It can be used to pay critical expenses and can be claimed for any type of health problem that fulfils the criteria of incapacity in your policy.

    When you apply for Income Protection when you're younger, you may be able to save money on your coverage.

    Because the cost of Income Protection is mostly determined by your chance of filing a claim, policyholders who are young and healthy non-smokers should anticipate paying a lot less for their policy than those who are older and perhaps not in such good health.

    However, if you are self-employed with a job such as a builder, plasterer, joiner, and painter, then don't worry as you can apply for sick pay just in a different way. We hope this article has helped you with all the information you need to know.

    Sources

    https://www.patriotsoftware.com/blog/payroll/sick-pay/
    https://www.simplybusiness.co.uk/knowledge/articles/2021/04/national-enterprise-allowance-scheme/
    https://www.simplybusiness.co.uk/knowledge/articles/2021/05/benefits-and-the-self-employed/
    https://www.gov.uk/employment-support-allowance/eligibility
    https://www.citizensadvice.org.uk/benefits/sick-or-disabled-people-and-carers/employment-and-support-allowance/help-with-your-esa-claim/check-if-you-can-claim-esa/
    https://www.drewberryinsurance.co.uk/income-protection-insurance/faqs/statutory-sick-pay-self-employed
    https://www.freeagent.com/guides/small-business/self-employed-sick-pay/#esa-self-employed

    Last updated by MyJobQuote on 9th March 2022.

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