The level of Statutory Sick Pay (SSP) increased in April 2023. Yet, ill workers are still likely to face financial hardships as it provides “very little insurance”, according to a Resolution Foundation report. The findings highlight how important having a financial safety net is.
As of May 2023, eligible employees will receive £109.40 a week under SSP if they need to take more than three days off work.
While SSP can be useful, it’s unlikely to cover your financial needs.
In fact, according to the report from the Resolution Foundation, SSP is only around 11% of the average salary for a full-time employee. Compare this to the OECD average of 64% of salary. The only OECD countries that ranked lower than the UK are South Korea and the US, which don’t provide any SSP.
In contrast, many other European countries pay either full wages or a percentage of earnings between 50% and 90% for an initial period. This led to the think tank stating SSP in the UK offers “very little insurance”.
In addition to the low flat rate, SSP is only paid for up to a maximum of 28 weeks. So, if you suffered from a long-term illness or were in a serious accident, it could stop before you’ve fully recovered.
Thinking about how you’d cope financially if you were forced to stop work due to an illness is important. It not only means you can meet financial commitments, but it can reduce stress at a time when you should be focusing on your health.
3 valuable steps that could improve your financial resilience
1. Read your employment contract
Some employers offer sick pay to employees as a benefit. So, your first task should be to review your employment contract to see if you’d be entitled to any support.
Sick pay from your employer may be a proportion of your current salary and cover a set period. For example, you may receive your full salary for the first three months you were unable to work, and then it would fall to half of your salary for an additional three months.
It’s important you know what would be covered so you can supplement this workplace benefit with other steps.
2. Review your emergency fund
Your emergency fund is crucial for providing a financial safety net for short-term illnesses.
Having funds to fall back on means you can top-up the money you may receive from your employer or SSP. It can help you to maintain commitments, like paying your mortgage, and your family’s lifestyle if you need to take time off work.
How much you should hold in your emergency fund will depend on your circumstances. It’s generally a good idea to have enough to cover at least three months of essential expenses in an accessible account.
3. Check if income protection is appropriate for you
While an emergency fund is useful for short-term shocks, what would happen if you needed to be off work for a long period?
No one wants to think about being involved in a serious accident or suffering an illness that takes months to recover from. But it does happen, and income protection can be valuable in these instances.
Income protection would pay you a regular income if you were too ill to work. This is often a percentage of your usual salary. It would continue to pay an income until you can return to work, retire, or the term ends.
Knowing you have an income you can rely on means you can focus on what matters.
You will need to pay premiums for income protection, and the cost varies depending on your circumstances and the level of cover you need.
Despite the value income protection can add to your financial plan, it’s often something employees overlook. However, if you couldn’t cope financially with the £109.40 a week SSP provides, can you afford to overlook it?
Contact us to talk to improve your financial wellbeing
If you want to create a financial plan that you can have confidence in, even when the unexpected happens, please contact us. We can work with you to create a financial safety net that reflects your priorities and concerns.
Please note:
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and condition and may have exclusions.
