Contracting and claiming SSP for limited company contractors

If you’re a contractor running a limited company, then you are eligible to claim Statutory Sick Pay (SSP) for sick leave. Nobody is immune to being ill, so you need to be sure of your rights as a limited company contractor and know if youre eligible to receive statutory sick pay.

This blog covers all you need to know about claiming Statutory Sick Pay (SSP) for limited company contractors.

This blog doesn’t cover self-employed contractors. If you’re a self-employed contractor, seek alternative advice. Self-employed contractors don’t pay through PAYE, which companies use to pay their employees income tax. Without PAYE, you arent entitled to the same employment rights. You wont be guaranteed sick pay, maternity leave or redundancy pay or other statutory benefits.

Limited company contractors SSP

If you’re a limited company contractor, you can claim SSP.

To be eligible for you must meet certain criteria including:

• have been sick for 4 or more days in a row (including non-working days) - known as a ‘period of incapacity for work’.
• earn an average of at least £123 per week (known as the lower earnings limit)

If youre a contractor that runs a limited company you should be classed as an employee under workers rights set out by HMRC.

How much is SSP?

Statutory Sick Pay (SSP) is currently £99.35 a week.

How long is SSP paid for?

SSP is paid for up to 28 weeks.

Linked period of sickness

The three days before SSP kicks in are called ‘waiting days’, these wont be covered by SSP unless consecutive periods of time off for sickness are linked.

Linked periods of sickness are consecutive periods that occur less than 56 days apart, and where the second period is for four days or more.

Do I need a doctors note to claim SSP?

If you fall ill, there is currently no requirement for a ‘sick note’ or doctor’s visit to justify a claim for SSP.

Calculating the lower earnings limit

To qualify for SSP, a contractor’s average weekly earnings must be above the lower earnings limit, which is £123 per week earned in the period of at least 8 weeks before the first day they are off sick.

Most contractors tend to qualify, but there it can be complex to calculate a contractors average earnings to know whether a contractor qualifies. Seek advice.

SSP, IR35 and contracts

Contractors working within IR35 could negotiate to receive sick pay with their clients as part of contract negotiations. This will be subject to rules on off payroll working.

IR35 determines if you’re an employee of a client without an intermediary. If so, you’ll pay national insurance and income tax like employees of that company and would be eligible for the same rights as other employees of your client, including sick pay.

SSP & PAYE

Contractors entitled to recover SSP, can deduct it from payroll liabilities, or reclaimed from HMRC if there are insufficient Pay As You Earn (PAYE) funds to cover payment.

Sick pay insurance

Whilst SSP provides you a small income when you are ill, it is unlikely to be able to financially support you in the long term if you are losing your contractor earnings. Contractors should take out income protection insurance to provide you with more financial cover for such long term sickness instances.

Income protection insurance will provide you with monthly payments if you are diagnosed with a disease or suffer long periods of absence from work due to sickness or injury.

If the unexpected were to happen, there is peace of mind in the knowledge that you are able to maintain your current lifestyle, no matter what. You may also want to feel reassured about going back to work after an incident, in a reduced capacity or on a lower salary.

You can tailor your insurance to how much you would like to receive and income protection insurance will cover you to receive additional income on top of basic SSP. However, most policies wont pay out for the first thirty days that you are sick, so it won’t cover you for short-term illness.

Keeping money in the business to cover sick pay

If you need to cover periods of less than 30 days of sickness or you dont take out income protection insurance, then you need to ensure you have money in the business to continue to pay yourself for day’s you aren’t able to work.

This comes down to preparing for those times and managing your business finances sensibly to provide for times of crisis or non work.

Covid Statutory Sick Pay Rebate Scheme

The Statutory Sick Pay Rebate Scheme was closed on 17 March 2022.

This scheme was introduced during the pandemic and under the scheme, employers could claim back up to two weeks of Statutory Sick Pay (“SSP”) due to Covid-19.

Employers and contractors are no longer able to claim back SSP for coronavirus-related absence, including self-isolation, that occur after 17 March 2022.

Reclaiming SSP by employers

If you’ve paid SSP from your limited company as an employee, you are then eligible to reclaim SSP from payroll liabilities or directly as an employer from HMRC.

However, its worth noting that you can only reclaim SSP if the SSP payments made to you are greater than 13% of the company’s gross Class 1 National Insurance Contributions (NICs) liability for that month. HMRC calls this the Percentage Threshold Scheme (PTS).

Contractors inside IR35, or who choose to pay themselves a salary above the personal allowance, are entitled to offset SSP to themselves from the money they owe HMRC for income tax and National Insurance.

However, most contractors pay themselves low salary and high dividend, which results in little or no payroll liability, so they have nothing to offset SSP against.

If youre a contractor and you find yourself in the situation where you are ill and youre not sure if youre entitled to SSP, then contact the dns contractor team today. Call us on 03300 886 686 or email on enquiry@dnsaccountants.co.uk.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.