Statutory sick pay insurance, UK 2026: protect your business from sickness costs
Since April 2026, statutory sick pay starts on the first day of sickness and far more of your staff qualify for it. Add your own sick pay on top and a single long absence can cost a small business thousands. We help employers across Northamptonshire, Bedfordshire and the UK put the right sick pay insurance in place, so an illness does not become a cash flow problem.
What is statutory sick pay and who pays it?
Statutory sick pay (SSP) is the minimum level of sick pay an employer must pay an employee who is off sick and unable to work. It is a legal minimum, not a benefit paid by the government. The employer pays it through payroll, and the employer carries the cost. There is currently no government rebate scheme to claim SSP back, so every pound of statutory sick pay comes out of your business.
Many employers offer more than the minimum through contractual sick pay, sometimes called a company sick pay scheme. This is whatever your employment contracts promise over and above SSP, for example full pay for four weeks then half pay for four weeks. Whatever you promise, you have to fund. Statutory sick pay insurance is designed to pay towards that cost: it helps an employer meet sick pay, and the cost of covering the work, when an employee cannot work due to illness or injury.
People who are self-employed do not get statutory sick pay: self-employed sole traders and partners fall outside it entirely. SSP also does not apply to company directors who are not on the payroll as employees. For directors, we usually look at executive income protection instead.
How statutory sick pay works from April 2026
The Employment Rights Act 2025 changed the rules from 6 April 2026. Acas and the government describe three changes every employer needs to build into their sick pay policy:
Paid from day one
The three unpaid waiting days have gone. SSP is now paid for the days you normally work from the first day of sickness, so short absences of one to three days now cost money where they did not before.
No lower earnings limit
The lower earnings limit has been removed, so part-time and lower-paid staff who previously could not qualify for statutory sick pay now get statutory sick pay too.
A new rate
SSP is paid at the lower of 80% of average weekly earnings or the standard weekly rate, which is £123.25 a week from 6 April 2026. It lasts for up to 28 weeks in any one period of sickness, including linked absences.
The government estimates the changes add around £450 million a year to employer costs, and the Office for National Statistics estimates that around 148 million working days are lost to sickness or injury each year. For a small business, the bigger risk is not the average. It is the one long absence that runs for months while you also pay someone else to cover the work.
Can you get insurance to cover sick pay?
Yes. There is no single product sold under the name statutory sick pay insurance, but there are several insurance policies an employer can use as sick pay cover for time off work due to illness. The right one depends on how many staff you have, what your contracts promise, and how long a period of sickness you could fund yourself.
- Group income protection. The main tool for employers. The insurer pays the benefit to the business once an employee has been off for an agreed deferred period, often 13, 26 or 52 weeks, and keeps paying for as long as the policy allows. The business then pays the employee through payroll. We explain it in full on our group income protection page.
- Short-deferred or limited-term schemes. Some insurers will set a shorter deferred period, sometimes as short as four weeks, with benefits paid for a fixed term such as two or five years. This brings cover closer to the start of an absence, which is where most businesses feel the sick pay cost.
- Cover for key staff. Where losing one person would hit profits, key person insurance or key person income protection pays the business, not the employee, to cover lost revenue or recruitment.
- Health and wellbeing benefits. Private medical insurance, a health cash plan or an employee assistance programme will not pay sick pay, but they can shorten sick leave by getting people treated sooner.
Unlike payment protection insurance or mortgage payment protection, which protect one person's loan, these are employer policies. The business owns the policy, pays the premium and receives the claim money. Sick pay insurance and income protection for staff sit alongside other employer benefits such as death in service life insurance and group critical illness insurance.
What happens when you run out of sick pay after 28 weeks?
When SSP stops, the employer's legal duty to pay it stops too. If occupational sick pay has also run out, the employee's pay may fall to nothing. At that point many people apply for Employment and Support Allowance or Universal Credit, which pay far less than a salary, and the employer is left with an unresolved absence, a vacant role and a difficult decision.
This is where an employer scheme earns its keep. Because most schemes are set with a deferred period that matches the end of your own sick pay, the insurer's monthly income is timed to start when your sick pay stops. The employee keeps a regular income, usually a percentage of salary such as 50% to 80%, so they can still pay the bills, and the business does not have to fund it.
Without insurance
SSP for up to 28 weeks, plus anything your contracts promise, plus the cost of covering the work. When sick pay ends, the employee has only state benefits and you have no support.
With an employer scheme
The insurer pays a replacement income each month once the deferred period ends, can include employer National Insurance and pension contributions, and funds rehabilitation to support a return to work.
How does group income protection work as sick pay insurance?
An employer sick pay insurance policy works in five steps:
- You choose the level of cover you need. Usually a percentage of each employee's salary, plus whether to include employer National Insurance and pension contributions.
- You set the waiting period. This is the deferred period before the policy pays. No policy will pay out immediately, and the longer the waiting period, the lower the premium.
- You choose how long it pays. Either a limited term, such as two or five years per claim, or a long-term policy that can pay out for as long as the employee cannot return, up to retirement age or the end of the policy.
- An employee falls ill. Should someone become too ill to work, you notify the insurer early. Most insurers have early intervention teams who can arrange physiotherapy, counselling or a phased return before a claim is even needed.
- The insurer pays the benefit to the business. You pay the employee through payroll, deducting tax and National Insurance as normal.
Group income protection covers everyone in an eligible category, such as all permanent employees, usually without individual medical questions up to a free cover limit. That makes it far simpler than buying individual income protection policies for each member of staff.
Want to know what your sick pay risk actually costs?
Book a free callHow much is sick pay insurance for a business?
The premium for an employer scheme is usually quoted as a percentage of the salary roll. Illustrative only, many small business schemes sit somewhere around 1% to 2.5% of the total salaries covered, but the real figure depends on:
- the waiting period you choose (four weeks costs much more than 26 weeks);
- how long the policy pays for each claim;
- the percentage of salary insured;
- the age profile, jobs and absence history of your team;
- your industry, since manual work carries more risk of injury than office work;
- whether employer pension and National Insurance contributions are included.
The best income protection insurance for a business is rarely the cheapest. It is the scheme whose deferred period, definitions and rehabilitation support fit how you actually run sick pay.
Is sick pay insurance tax deductible?
In most cases, premiums an employer pays for group cover are treated as an allowable business expense, and the employee does not pay tax on the premium as a benefit in kind. Claim payments received by the business are taxable, but because they are passed to the employee as salary, the deduction usually balances out. The employee pays income tax and National Insurance on the benefit, just as they would on normal pay. Tax treatment depends on your circumstances, so check the detail with your accountant.
Does it cover pre-existing conditions?
Group schemes are often more generous than individual cover. Many insurers accept employees without medical underwriting up to a free cover limit, and take on existing conditions for larger groups. Smaller groups may have a pre-existing conditions exclusion for the first year or two. We check this line by line before you take out the policy.
Do you need insurance cover if your staff receive statutory sick pay?
Paying SSP is a legal requirement; insuring it is a choice. For a business with a handful of staff and nothing extra in its contracts, the cost of statutory sick pay alone is often manageable, and self-insuring can be the right answer. The picture changes when:
- your contracts promise full pay or half pay for weeks or months, which is common in professional firms, care, education and manufacturing;
- you rely on a small team, so every absence means paying overtime, agency staff or a contractor as well as sick pay;
- you want a benefit that helps you recruit and keep people, because every employee relies on their income and staff who can't work due to illness worry most about money;
- you have had someone off work due to long-term illness before and know how disruptive it is.
Employers who take out income protection for their team usually tell us the biggest benefit is not the money. It is having a plan and a rehabilitation team when an employee is off work due to sickness for months. We will show you both routes honestly. If your risk is small enough to carry yourself, we will say so.
Sick pay insurance compared with other income protection policies
It is easy to confuse the types of income protection insurance UK businesses and individuals can buy. Here is how the main options differ:
Employer group scheme
Employer-owned. Covers a group of employees and pays a monthly income after a deferred period. The best fit for long-term sickness absence.
Individual income protection
Owned by one person and bought for themselves, typically replacing a percentage of your income. If you are self-employed and want to protect your income, this is where you would look, because the self-employed have no employer sick pay. The UK income protection market for individuals is separate from group cover.
Accident, sickness and unemployment
ASU cover is short-term personal cover, usually for 12 or 24 months, often linked to a mortgage. It is not an employer product.
Critical illness cover
Pays a lump sum on diagnosis of a specified serious illness. Our group critical illness cover gives this to a whole team.
How to claim statutory sick pay and make a claim on your policy
Employees claim statutory sick pay from you, the employer, by telling you they are ill within your notification deadline. After seven calendar days off, they need a fit note. You then pay SSP through payroll on the usual payday.
To make a claim on an insurance policy, start early. Tell the insurer as soon as an absence looks like it could run past a few weeks, even though the deferred period has not ended. Most insurers will then:
- ask for a claim form from the business and the employee, plus the fit note;
- speak to the employee about their condition and what support would help;
- arrange treatment, therapy or a workplace assessment where it would help;
- start paying the monthly benefit once the deferred period ends, if the employee still cannot work.
Read your policy documents for the definition of incapacity. Most group policies pay if the employee cannot do their own job; some use a stricter test after a period of time. We explain the wording before you commit, not after a claim.
Why use a broker for statutory sick pay insurance?
Whole of market for group risk
We compare employer schemes from the specialist insurers, not just one brand.
Matched to your sick pay policy
We align the deferred period so that benefits start when your sick pay stops, with no gaps and no double cover.
Plain English
We explain the definitions, exclusions and tax in terms you can act on.
Support at claim time
If an employee is off long-term, we help you work with the insurer.
We are a family-run broker, regulated for protection, and we work with small and medium-sized employers across Northampton, Wellingborough, Kettering, Bedford and beyond. See our wider business protection and employee benefits for small business guides.
Statutory sick pay insurance: quick answers
Who covers statutory sick pay?
The employer. Statutory sick pay is paid through payroll and funded by the business. There is no government rebate at present.
How long can statutory sick pay be claimed?
Up to 28 weeks in any one period of sickness, including linked periods of absence.
How much is statutory sick pay in 2026?
From 6 April 2026 it is the lower of £123.25 a week or 80% of the employee's average weekly earnings, paid for all the days you are off sick that you would normally work, from day one.
Can I claim statutory sick pay more than once in a year?
Yes. Separate periods of sickness can each attract SSP. Absences within eight weeks of each other are linked and count towards the same limit.
How much is private sick pay insurance?
For individuals it depends on age, job and health. For employers, group schemes are priced as a percentage of the salary roll, often around 1% to 2.5% illustrative only, depending on the deferred period and the length of cover.
Can I get more than statutory sick pay?
Only if you get sick pay from your employer under your contract, or hold your own cover. Your contract sets out your sick pay entitlement. Many employees may get sick pay only at the statutory rate, which is why employer schemes are valued.
What if you're unable to work for longer than your sick pay lasts?
If your employer has a group scheme, it will usually start when your sick pay stops. If not, you may need to apply for state benefits.
Does sick pay insurance cover unemployment?
No. Employer sick pay insurance covers absence through illness or injury, not redundancy. Employees receive sick pay under the scheme only while they are unfit for work.
Talk to us about sick pay cover for your team
Book a free call. We will look at your staff, your sick pay policy and your budget, and show you whether insuring it makes sense.
Book your business protection callThis page is general information, not a personal recommendation. Tax treatment depends on individual circumstances and may change.