Contractor guide to umbrella company sick pay

Contractor expenses when using an umbrella company, similarly pensions through an umbrella company, and even holiday pay as an umbrella employee.

All demystified for ContractorUK readers in relation to the new IR35 off-payroll rules. So it seems fitting that sick pay as an umbrella company contractor has been left to last, as typically it is this aspect of working through an umbrella company that contractors only really delve into when they absolutely have to -- because they need it, often when they’re not feeling 100%.

Sick pay: don’t suffer by leaving it until you're poorly

But sick pay should not be an afterthought because sick pay is a crucial element of UK employment law, including for those working through an umbrella company, writes Joanne Harris, head of technical, compliance and payroll at Parasol. 

It really is important for contractors to take the time to understand in advance of falling ill how sick pay works alongside, of course, the other statutory benefits that users of umbrella companies are entitled to.

So contrary to what unions sometime indicate, umbrella employees do have statutory rights and protections afforded to them, meaning every employee of an umbrella company is entitled to sick pay. This currently sits in line with Statutory Sick Pay (SSP) at £96.35 per week -- for up to 28 weeks, and it’s paid to the contractor (i.e. the employee) by the umbrella company for the period of absence.

Sick pay because of coronavirus is also considered the same for umbrella employees.

Is SSP different for umbrella employees?

Statutory Sick Pay works the same for all company employees as it does for umbrella company employees.

So certain criteria have to be met, which includes a contractor needing to have been ill for four consecutive days (including weekends) to be eligible.

They must also have already completed some work as part of their contract.

What about eligibility and deadlines with umbrella sick pay?

To be eligible, contractors must inform their umbrella company that they are ill within seven days of becoming unwell.

If this seven-day deadline cannot be met, the umbrella employee (i.e. the contractor) could lose some of their SSP. However, in the current climate with the pandemic still causing tens of thousands of new cases a day, if a contractor is ill for longer than seven days, then they will need:

• An ‘isolation note’ if a contractor is unable to work because of covid-19.
• A notification from the NHS or public health authorities if a contractor has been told to self-isolate because they have come into contact with someone with covid.
• A ‘fit note’ (or ‘sick note’) if a contractor is off sick for another reason
• A letter confirming the date of a procedure if a contractor has been advised to self-isolate before going into hospital for surgery

Covid sick pay, or not?

Generally, the rules of SSP mean that the first three days of illness do not qualify for payment.

However if your absence is related to covid-19, SSP is payable from the first qualifying day.

But payment will only cover the specific days when a contractor would have been in work, so if this includes weekends then they will be covered, and these will be classed as ‘qualifying days.’

Are there any times when SSP won’t apply?

To be eligible for sick pay via their umbrella company, a contractor must earn an average of £120 per week -- this amount is before tax and National Insurance.

The calculation for this is worked out over an eight-week period, which ends with the last date the contractor was paid before illness.

Even if a contractor has recently started a job and has not yet had eight weeks pay, sick pay can and will still be applied if the other criteria is met.

There are some other exceptions to keep in mind in relation to SSP, which include the fact that umbrella contractors cannot claim if they have already received the maximum amount of statutory sick pay for a period of 28 weeks. Anyone receiving statutory maternity pay is also not able to claim SSP.

And finally, how to claim SSP

To claim Statutory Sick Pay (SSP), contractors simply need to inform their umbrella company. It's important to check exactly how this is required - for example via email, a telephone call or by calling a dedicated point of contact. Again, checking in advance of falling ill can save a headache, or a second headache at the very time you’re already suffering and simply wanting to exercise your right to statutory sick pay as an umbrella employee.