Income protection vs sick pay

Sick pay and income protection both help when illness or injury stops you working, but they are very different tools. Sick pay is short-term and limited. Income protection is a longer-term insurance designed to replace part of your income if you cannot work for an extended period. For many UK employees, income protection is what carries on once sick pay runs out.

This guide explains how each works, where the gaps usually appear, and when income protection may be worth considering.

What is Statutory Sick Pay?

Statutory Sick Pay, or SSP, is the legal minimum employers must pay to eligible employees who are off sick. GOV.UK explains the rules, including who qualifies, how long it lasts, and the current weekly rate.

Key points to know:

• SSP can be paid for up to 28 weeks for a single period of sickness.
• It is paid by the employer through normal payroll, with tax and National Insurance treated like wages.
• There are eligibility rules, including a minimum earnings threshold and how the absence is reported.
• The rate is set by the government and updated periodically. You can check the current weekly amount on GOV.UK.

For most people, SSP alone is far below their normal take-home pay. Citizens Advice notes that SSP is a basic minimum and many employees rely on contractual sick pay or other support to cover the gap.

What is contractual sick pay?

Contractual sick pay is the sick pay your employer offers in your contract or staff handbook. It can include full pay for a set period, then half pay for a further period, and then SSP only.

Common UK patterns include:

• Full pay for one to three months, then SSP only.
• Full pay for six months, then half pay for six months, then SSP only.
• A set number of weeks of full pay that increases with length of service.

There is no UK-wide rule for contractual sick pay. The terms depend on each employer. Public sector roles often have more generous schemes, while many smaller employers pay only the statutory minimum.

It is worth checking your contract before assuming you have a long sick pay safety net.

What is income protection insurance?

Income protection is an insurance policy that pays a regular monthly benefit if you cannot work because of illness or injury, subject to the policy terms.

Common features include:

• A monthly benefit, usually a percentage of your income, often around 50% to 65% of gross earnings.
• A waiting period before the benefit starts, sometimes called a deferred period. Common choices are 4, 8, 13, 26, or 52 weeks.
• A claim period, which can be short term, often one or two years per claim, or long term to a chosen end date such as your state pension age.
• Cover continues to pay if you remain unable to work, up to the policy limits.

MoneyHelper notes that income protection is designed to replace part, not all, of your income, and to keep paying for an extended period if you remain unable to work. The benefit is usually paid free of UK income tax when the individual pays the premiums personally.

Where the gaps usually appear

A typical UK pattern looks like this:

• The first one or two weeks of sickness may be covered by full pay.
• Weeks two to twenty-eight are covered by some mix of contractual sick pay and SSP.
• After 28 weeks, SSP ends. Some employees may move onto Universal Credit or Employment and Support Allowance, but household income normally falls sharply.

Income protection usually has a waiting period that lines up with the end of sick pay. For example, if your employer pays full sick pay for six months, you might choose a 26-week deferred period so the policy starts paying as your sick pay ends.

This is why income protection is often described as a long-tail safety net rather than a replacement for sick pay.

What about the self-employed?

Self-employed people do not get SSP. That makes the gap larger, because the only income during a long illness may come from savings, dependants, or state benefits.

For the self-employed, income protection is often the main answer rather than a top-up. A shorter deferred period, such as 4 or 8 weeks, can make sense, although the premium is normally higher than for a longer wait.

Watch out: common pitfalls

A few things catch people out.

• Definitions of incapacity matter. The most generous definition is normally own occupation, which assesses whether you can do your own job. Other definitions, such as suited occupation or activities of daily working, are stricter.
• Pre-existing conditions may be excluded or rated. The insurer underwrites at application based on your medical history.
• Mental health conditions are usually covered by mainstream policies, subject to underwriting and the policy definition of incapacity.
• The maximum benefit is capped as a percentage of income, even if you would like to insure more.
• If you receive other income while on claim, such as continuing employer sick pay or some state benefits, the insurer may take this into account.

Should you have both?

For most employees, the most useful question is not income protection or sick pay. It is income protection in addition to sick pay, set up so the policy starts paying around the time sick pay ends.

A simple approach:

• Find out how long your full and half sick pay lasts.
• Choose a deferred period that lines up with the end of full pay or half pay.
• Choose a benefit level that brings your monthly income back to a workable amount.
• Choose a claim period that gives long-term protection, ideally to a chosen retirement age.

For self-employed people, the same logic applies, but the deferred period is set against personal savings rather than employer sick pay.

How does this connect to claims?

The Association of British Insurers reported that UK protection insurers paid a record GBP 8 billion in combined group and individual protection claims during 2024. Income protection is one of the policy types included in those figures and it is designed to keep paying during long claims, not only at the start.

Bottom line

Sick pay is a short-term cushion. Income protection is a longer-term insurance designed to step in when sick pay ends. Most UK employees would feel a sharp drop in income after a few months of illness, and that is the gap income protection is built for.

If you would like to look at suitable income protection options, GoInsureMe can help you compare cover and choose a deferred period that matches your sick pay.