Understanding protection insurance State benefits

Statutory sick pay (SSP)

SSP will only last for a short time, although you may be entitled to further support

If you are employed, aged between 16 and 65 and off work sick for at least four days or more (in a row, to include weekends and bank holidays) you'll usually receive SSP. During 2008-2009 the amount paid is £75.40 a week.

To qualify, you must earn before tax and National Insurance, an average of £90 a week (during 2008-2009). This is called the Lower Earnings Limit for National Insurance Contributions. Your earnings are averaged over an 8-week period before your sickness began, although this period may vary slightly depending on whether you are paid weekly or monthly. If you have just started your job then the calculation may be different. Your employer will be able to tell you. 

You don't get SSP for the first three days of illness. SSP is paid for a maximum of 28 weeks by your employer, with tax and National Insurance Contributions (NICs) deducted. Self-employed people are not entitled to SSP.

Incapacity benefit (IB)

Currently (and up to October 2008) if you are off work for more than 28 weeks you will move from SSP onto Incapacity Benefit (IB). You'll go straight onto Incapacity Benefit if you're not eligible for SSP (for example if you are self-employed, or earn less than the Lower Earnings Limit). However it's not paid if you were over state pension age when you fell ill. 

To qualify, you must have paid NICs and been unable to work because of sickness or disability for at least four days (or it's paid when SSP ends). 

The amount you get will vary depending on the length of time you are off work. Figures for the current financial year are as follows:

• For the first 28 weeks of your claim you'll receive short-term (lower) Incapacity Benefit which is £63.75 a week (for 2008 -2009). This payments is tax-free
• If you are off work for between 28 and 52 weeks, you are entitled to the short-term higher rate of £75.40 a week (for 2008 - 2009) which is taxable
• For anything over 52 weeks, you'll get the long-term basic rate of 84.50 a week, which is also taxable.

These amounts increase annually with inflation and are means-tested, so the amount you get is affected by any other income such as a pension or some protection policies. Your benefit is reduced by 50p for each £1 your income exceeds £85 a week. 

For more information on state benefits, see the Department of Work and Pensions website. 

New rules from October 2008

From 27 October 2008 the position dramatically changes for new claimants. The current Incapacity Benefit will be replaced by a new benefit called Employment and Support Allowance (ESA).  

How the new benefit works for employed people

Statutory sick pay will stay as it is now and will cover the first 28 weeks of sickness. If you are still unable to return to work after 28 weeks, there will be a 13 week assessment period to find out if you are eligible for ESA and, if so, what type. During this period you'll receive an amount broadly in line with Jobseeker's Allowance - around £60 a week (during 2008-2009) for people 25 and over.

If you are assessed as being capable of doing some form of work, you'll be entitled to claim ESA of (currently) £84.50 a week until you can get back to work. However,you'll be required to attend work-focused interviews during the time you are receiving benefit. If you are assessed as being unable to do any form of work you'll receive ESA of (currently) at least £89.50 a week indefinitely.  

All people claiming ESA will continue to be eligible for other benefits such as Disability Living Allowance, Housing Benefit and Council Tax Benefit. 

How the new benefit will work for the self-employed

The position is the same for self-employed people except that, if you are self-employed, you will go straight into the 13 week assessment period (as there is no SSP for self-employed people). 

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