Understanding Statutory Sick Pay for Company Directors: What You Need to Know
As the director of a small company, it’s easy to forget that you’re also considered an employee for many purposes. This dual role includes certain rights, including Statutory Sick Pay (SSP) entitlement. However, many directors need to pay more attention to this benefit, unaware of its potential advantages. Let’s delve into the world of SSP for company directors and uncover some surprising insights.
The Basics of Statutory Sick Pay for Directors
Contrary to common belief, company directors are indeed eligible for SSP. Your position as a business owner is independent of your status as an employee when it comes to sick pay entitlements. If you fall ill, you can claim SSP, just like any other employee in your company.
What Counts as Earnings?
Regarding SSP, all forms of income from your business are considered. This includes Director’s fees and Wages for other work performed within the company.
The Substitution Approach: A Closer Look
While it’s possible to substitute a portion of your normal pay with SSP, this approach often needs to be revised for directors. For instance, if you’re entitled to £350 of SSP, you could reduce your wage by the same amount and use SSP to bridge the gap. However, this method doesn’t alter the overall cost to the company or the amount you receive. Moreover, the income is treated identically for tax and National Insurance purposes.
The Hidden Benefits of SSP for Directors
At first glance, many directors dismiss SSP as pointless, believing it reduces company profits without providing any real benefit. However, this perspective often overlooks a crucial factor: government compensation.
Reclaiming SSP from the Government
Your company may be eligible to reclaim a portion of the SSP paid out, including that paid to directors. This is typically done through reduced PAYE payments. For companies with lower wage bills, this could mean reclaiming all or part of the SSP.
You can reclaim 92% of the SSP paid (or 103% if entitled to Small Employers Relief).
Making the Most of SSP as a Director
While the SSP system may seem complex, it’s worth understanding and utilising when necessary. Here are some key points to remember:
- Don’t dismiss SSP outright – it could lead to a net gain for your company.
- Keep accurate records of SSP payments and National Insurance contributions.
- You can submit a written request to HMRC if you can’t reclaim through reduced PAYE payments.
A Valuable Right Worth Exercising
Recognising and exercising your employment rights, including SSP, is crucial as a company director. While it may not always seem beneficial at first glance, the potential for government compensation makes it a valuable tool in managing your company’s finances during illness.
By understanding the intricacies of SSP, you can ensure you’re not leaving money on the table and that you’re taking full advantage of the benefits available to you as both a director and an employee.
We Can Help
Are you a company director still determining your SSP entitlements or how to claim them effectively? Don’t leave potential benefits unclaimed.
Contact Robert A Harris and Company today for expert advice on maximising your SSP and other financial entitlements. Let us help you navigate the complexities of director finances and ensure you’re making the most of every opportunity available to you and your business.