Are Directors Entitled to Claim Sick Pay?
Can Directors Claim Sick Pay? – Here’s What You Need to Know
Being ill is never fun, and worrying about making ends meet, or having enough money to pay the bills at the end of the month is definitely a concern you can do without.
So Can Directors Claim Sick Pay? There are rules and entitlements to know about as a Company Director when determining if you’re eligible for sick pay – and it’s a good idea to know what these are before you actually need to apply.
[Doctor illustration]
What is Statutory Sick Pay?
When researching Can Directors Claim Sick Pay it is always worth knowing what Statutory Sick Pay (SSP) is. It is an amount paid by employers to employees who are too ill to work, and qualifying payments can be made for up to 28 weeks. People who are eligible for sick pay will be entitled to £99.35 per week, although they may get more if their company has a sick pay (occupational) scheme.
However, to qualify for SSP, an individual must be:
Classed as an employee and have done work for the employer
Earning an average of at least £123 per week
Ill for at least 4 consecutive days (this includes non-working days)
There are exceptions to these qualifications – such as having already received the maximum amount of SSP or are receiving Statutory Maternity Pay.
What are the Rules for Claiming SSP as a Director?
As we mentioned, SSP is paid by employers to employees, so if you’re classed as Self Employed, then you are not eligible for SSP and would need to look at Employment and Support Allowance (ESA) as an alternative.
Can Directors Claim Sick Pay? For Directors, who are classified as employees, SSP is available provided they meet the conditions, which includes having average weekly earnings meeting (at least) the Lower Earnings Limit (LEL), which is currently £123 a week / £533 per month.
The method to calculate weekly earnings will depend on how the Director is paid, and generally any earnings that a Director receives from the business will count towards the LEL, unless HMRC have otherwise specified.
Amounts that may be included in the LEL calculation include:
Dividends
Wages for other work done for the company
Director fees
Calculating Weekly Earnings as a Director
How is statutory sick pay assessed for directors?
The formula of assessing SSP is strict and often works in the favour of smaller companies. If you are a small business with a small wage bill then it is likely that you will be able to reclaim ay payments made under SSP rules. The rules state that if SSP is more than 13% of national insurance contributions then it can be reclaimed. One of the advantages of outsourcing your payroll is that all of the administration linked to SSP will be taken care off on hence claiming SSP need not be problematic.
How is Director SSP Calculated?
It does not matter whether a director or business owner receives a fee or a salary; they both count under the rules pertaining to SSP. SSP can be used to top up a shortfall in a normal salary. For example if a normal salary were £1,000 per month and a director decided to claim SSP. The normal salary could then be reduced to £800.00 and then be topped up with £200.00 SSP.
Paid by a Regular Salary
Average weekly earnings must include all earnings on which Class 1 NICs are due (or would be due), and the earnings in the relevant period are divided by the number of days, weeks, or months in that period.
This is the same process that would be conducted for any other employee.
Paid Only by Formal Resolution
To calculate the weekly earnings when payment is agreed by formal resolution, the dates of the formal resolution would be substituted in place of normal paydays, and any payments which are made in anticipation of the resolution would not be taken into consideration for the calculation (even if NICs were deducted at the time).
Paid by Determination of Directors
If paid by determination rather than a formal resolution, the average weekly earnings would be calculated by substituting the date of payment in the place of normal paydays
If however, the Director was paid contractually and by a formal vote / determination, then they would calculate their weekly earnings in the same manner as any other employee – and would count the separate payment on the date of payment, even if agreed by formal resolution.
Can Directors Claim Sick Pay? – Getting Help and Advice on SSP and Other Benefits
There are deadlines involved with SSP, so knowing what you’re supposed to do and when you need to do it is important.
When you’re claiming SSP, you have to inform your employer that you’re unable to work, and this must be done within any deadline the company has set, or within 7 days if they haven’t set a specific timeframe.
It is extremely important that you make your claim within this time period as you may lose some of your SSP if you haven’t notified your employer in a timely fashion.
Employers have to complete form SSP1 and HMRC provide an SSP Calculator to work out how much is due to the employee, unless the employee was off sick due to COVID-19, in that case, the amount would need to be worked out manually instead.
To help you ensure that you’re claiming the right benefits for your situation and that you’re not missing any important deadlines, our team of experts are here to help. We can help you manage your legal obligations, and make sure any records kept have the right information.
Contact us today, and let’s discuss your position as a Director, and how we can help you make the most of it, in sickness and in health!
