The basic answer to this question is a resounding “no”. Under normal circumstances, i.e. paying your Class 2 National Insurance Contribution (NIC) when HM Revenue & Customs (HMRC) ask you to, there is no such thing as Government sponsored self employed sick pay. The Class 2 NIC covers you for State Pension (at a basic level); Maternity Allowance; and Bereavement Benefits. If you want to cover yourself for being off sick, there are two ways to do it: arrange for a private health insurance scheme, or make sure you’ve got enough money in the bank to cover the likelihood that at some point you’ll need to take time away from work.
So is that why my hourly rate is higher than an employee’s?
In lots of cases, from teaching to accounting and most trades in between, the hourly rate a self employed person gets is noticeably higher than the amount paid to an employee. This is because employees are guaranteed a certain amount of work per week, or per billing period, in their contract; and because their employers are bound by law to provide them with Maternity Leave, Statutory Sick Pay, and Holiday Pay. If you work self employed but for an institution or large employer (like a school or college), your hourly rate is probably set by them. If you work completely freelance (i.e. you do different jobs for different clients with no predictable regularity), you’re likely to set your own. In both cases, the idea is to cover the fact that you don’t get self employed sick pay from the state.
I’ve heard about Employment and Support Allowance (ESA). What about that?
The ESA was introduced by the Department of Work and Pensions (DWP) in 2008. It’s intended to replace Incapacity Benefit, Severe Disablement Allowance, and Income Support – which means, of course, that you will only get it if your assessor deems you to be eligible. As there is no self employed sick pay from the Government, this is the only route you can go to get state benefits. You can find the basic criteria, and an overview introducing you to the scheme at the DWP website.
Can you explain more about a personal health insurance policy?
Health insurance covers you for different things, depending on what you pay. To get any health insurance policy you have to go for a medical examination. The purpose of this is to find out whether you have any existing conditions that heighten your risk of falling seriously ill (i.e. ill enough that you can no longer work). You’ll be asked if you smoke, and if so how much; and how much you drink. Your age and previous medical history are also taken into consideration. The more “at risk” you are, the higher your monthly payment will be.
Is there anything I need to look out for, specifically?
Absolutely. All insurance policies are only as good as their exceptions. An exception is a clause that lets the company off paying you in particular circumstances. Before you sign up for any health insurance plan, examine the insurance schedule in detail. This will tell you what you are covered for, what you’re not – and what exceptions will apply in what circumstances. With no self employed sick pay, you need to look at how long your insurance policy will pay out for, and whether it will pay a lump sum on your death: not a nice thought, obviously, but something to think about if you have a family depending on you.
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