Think tank calls for state-sponsored sick pay insurance for self-employed. What will it cover and for how much?
A recent report from the Fabian Society exposes the precarious financial position many freelancers and the UK economy face and suggests an opt-out sick pay insurance system to combat it. But what and how much will it actually cover? And are all self-employed workers on board with it?
If you’re one of the 4.4 million self-employed workers in the UK, you’ve probably worked even when your body was saying to Get back to bed, idiot, you need your rest. That’s the nature of self-employment. Id you don’t produce, you don’t get paid. It’s a vulnerability we freelancers all share, yet rarely talk about or, more importantly, address until it’s too late.
“Self-employed people need sick pay too,” that’s the headline message of the Fabian Society report, which found that the average full-time freelancer would lose 81% of their income if they were unable to work due to illness.
According to its Everyday Risk Report, self-employed individuals in the UK take an average of 3.9 sick days a year, which is 35% fewer than the average six sick days taken by employed workers. This disparity is attributed to the potential loss of income, as the self-employed often do not have access to paid sick leave.
This isn’t just a hypothetical problem; a fifth of self-employed people (19%) admit they’d have to carry on working if they were ill or injured, compared to just 12% of employees. The consequences are far-reaching, not just for their own well-being but for their clients and the wider economy, to which freelancers contribute a massive £366bn.
A recent survey found that three-fifths of freelancers (58 per cent) want the government to extend Statutory Sick Pay to them. The lack of a sick pay safety net is particularly concerning for those who are only self-employed due to a lack of suitable employment alternatives.
Economic impact on households and the broader economy
The financial vulnerability of self-employed individuals, particularly men who make up the majority of this group and often earn more, can have a severe impact on households where they are the primary breadwinners.
If a male breadwinner becomes ill, the household could, on average, face a significant drop in income, which can lead to financial strain and even poverty. This is not just a problem for individual families but also for the wider economy, as reduced consumer spending and increased reliance on social support systems can occur.
A significant portion of the self-employed workforce in the UK is male. According to a 2024 House of Commons Library Research Briefing on women and the UK economy, 35% of all self-employed workers are women, while 65% are men.
The gender pay gap also extends to self-employment. A 2020 report by GoSimpleTax found that on average, self-employed men earn 43% more than self-employed women. In 2019, self-employed women, on average, said they charged £117 for their day rates, while men charged £182, a £65 difference.
Head of Bectu Philippa Childs said, “Freelancers hold up our creative industries, but too often they miss out on vital support that other workers benefit from.
“The lack of an adequate sick pay regime means our members are often put in desperate situations, knowing that illness could cost them far more than just their health.
None of us should have to choose between our work and our health. A sick pay safety net for the self-employed is long overdue, and we urge the government to take these proposals seriously.”
The majority of freelancers want Statutory Sick Pay
A recent survey found that three-fifths of freelancers (58 per cent) want the government to extend Statutory Sick Pay to them. The lack of a sick pay safety net is particularly concerning for those who are only self-employed due to a lack of suitable employment alternatives.
Matthew Knight, Chief Freelance Officer at The Independency Co., said of the report’s aim to give the self-employed sick pay options:
This is what I called for in the recent roundtable with Mind and MP Nadia Whittome – more and more people fall outside of traditional employment models, and therefore are missing crucial support – and it will become a massive drain upon the public purse, if not considered holistically. Reforms in the employment bill don’t address the issue – so we need a worker’s bill, which goes beyond employment.
Another in-depth survey found that around two in five workers would switch to a salaried job if they could secure the same income, and that around one in eight would accept a 20 per cent pay cut to switch.
For this group, income protection is clearly a major concern. That does, of course, leave the majority who choose to remain in self-employment, and some might argue that this is the trade-off self-employed people consciously make.
However, the Fabian Society believes even if this were true, it should not disqualify them from financial support, especially when it relates to sickness, which is, by its nature, unforeseen by the individual.
According to the Fabian Society report, the engager contributions would only be available for those groups that have engagers, such as freelancers and gig economy workers. Self-employed people who do not have an engager, such as business owners, would have to pay 100 per cent of the cost. This would amount to approximately £10 a month.
Fabian Society report recommendations
Short-term (within a year):
- Reform Universal Credit to treat income protection insurance and ESA as earned income
- Support the development of bread funds through regulation and awareness campaigns
Medium-term (within this Parliament):
- Create an opt-out sickness insurance system funded jointly by self-employed workers (£5/month) and engagers (3p/hour). Payments would match statutory sick pay for employees, according to Bectu.
Long-term (next Parliament):
- Introduce full employment insurance covering both employees and self-employed, offering 50% income replacement for up to 12 months.
Challenges
- Mixed willingness among the self-employed to pay more tax for benefits.
- Irregular earnings and multiple engagers complicate administration.
- Patterns of work for self-employed people can be irregular, meaning it is more difficult to create and administer a fair and accurate form of sick pay
What are other countries doing about self-employed sick pay?
The UK government currently has no plans to offer sick pay to the self-employed, so the report looked at how other countries tackle this.
Norway: Offers 100% income replacement from the 17th day of sickness, with optional early coverage via a 3.3% income premium
Netherlands: Bread funds allow small groups of freelancers to pool resources for sick pay
Canada: Employment Insurance provides 55% of earnings up to $695/week, with the self-employed able to opt in
Proposals for the UK: Short-term fixes to big changes
The Fabian Society report outlines a series of recommendations for the UK, ranging from immediate reforms to a complete overhaul of the social security system.
Short-term: Reform Universal Credit to make it more supportive of freelancers and encourage the development of “bread funds” by providing regulatory support and promoting awareness
Medium-term: Create an opt-out sickness insurance system. This would be jointly funded by a small contribution from freelancers (around £5 a month) and engagers (3p per hour)
Long-term: Introduce a comprehensive National Employment Insurance system for everyone, both employees and freelancers, offering 50% income replacement for up to 12 months
The price of freedom: A controversial take
Not everyone is on board with the idea of a government-backed sick pay scheme for freelancers. Dave Chaplin, CEO of ContractorCalculator, argues that the very essence of self-employment is about “choosing true independence, accepting full personal responsibility.” He believes that to suggest sick pay for the self-employed is to “misunderstand the very point of self-employment.”
He states, “The self-employed manage their own risks, set aside reserves, or take out private cover if they wish. What they do not need is interference from government.”
In his view, these proposals are “nothing more than a state-sponsored piggybank” that erodes the freedom freelancers have worked so hard to achieve.
Points to ponder
Regardless of whether one agrees with the report’s findings or Chaplin’s perspective, this debate highlights the fundamental nature of freelancing in the UK. The experience of independent workers is far from uniform; they have different levels of autonomy, earning potential, and tax obligations.
This raises some questions: Is the freedom of being your own boss worth the significant financial risk, especially if the government doesn’t adequately value the contributions of the self-employed workforce? Or is it the responsibility of freelancers and specialist insurers to build purposeful safety nets to protect small businesses and, by extension, the wider economy?
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