Can you get paid sick leave as a contractor?

Working for yourself and being your own boss has its advantages, but there are down sides too, not least when you’re unwell.

At this time of year, when coughs and colds are everywhere, it’s hard to avoid getting ill. Even the hardiest of us are susceptible, but when you’re self-employed or working as a limited company contractor, being unable to work can mean you’re unable to earn.

If you’re not entitled to paid sick leave because you’re a freelancer, a self-employed contractor, a member of the CIS scheme or you contract through your own limited company, you will need to make your own provision for when you’re unable to work.

Generally speaking, your options will include:

• Savings

Setting aside some savings so that you have a reserve fund should you be unable to work is perhaps the easiest way to mitigate a temporary loss of income due to general sickness like coughs and colds in the winter months. How much you need to set aside will depend on how much you’re paid per day, of course. Perhaps start by setting aside 5 days’ worth of income, to give yourself a buffer so that you don’t have to work when you’re feeling dreadful.

• Insurance

Of course, savings will only last for so long so are not an ideal way to make provision for longer-term sickness.

Many contractors opt to cover longer term illnesses with ‘income protection insurance’ which will pay out when you’re sick, usually after a qualifying period. Most policies are designed to support long-term illness and cover your previous after-tax income.

Another insurance product which you may wish to consider is ‘critical illness cover’ which usually provides a lump sum payment if you’re diagnosed with specific illnesses.

The Money Advice Service is an independent body and provides a comprehensive guide to income protection insurance and critical illness cover and there are some handy tools on the website to help you decide whether insurance will suit your needs.

• Sub-contracting your work

Under certain circumstances it may be possible for you to sub-contract work to another person (subject to your IR35 status). Whilst you’ll need to cover their pay from your income so you will not have the full income to yourself, it does mean that you continue to earn at least something while you’re not at work. Plus, providing a trusted stand-in can help to maintain customer satisfaction as it means your project is not disrupted by your absence.

• Using an Umbrella company

If the thought of being off sick and unable to earn is rather daunting, it may be that Umbrella employment would be a good option to consider. We support thousands of contractors in this way, indeed our Umbrella service is one of the longest-established in the UK.

Working this way means you become an employee of the Umbrella company. While this is a less tax efficient way to work than self-employment or limited company contracting, it does give peace of mind. This is because all Umbrella employees are entitled to statutory benefits including sick pay, holiday pay, maternity/paternity/adoption leave as well as access to a company pension scheme and a record of continuous employment which is helpful when applying for mortgages and other types of loan.

If you would like to consider becoming an Umbrella employee, we can take you through a Contractor Assessment to see if you are eligible. If you are, we will provide detailed pay illustrations to show you how your take-home pay might be affected. Take-home pay is an important consideration, but it should be balanced against the various benefits that Umbrella employment offers.

• Talk to us

Our expert team is here to provide clarity on all aspects of successful contracting. Please get in touch today if you wish to discuss making provision for sick leave, or if you wish to explore what’s involved in joining the thousands of contractors who are employees of our Umbrella company.