Employee benefits that self-employed workers miss out on, and how to bridge the gap

Posted on

There are more than five million self-employed workers in the UK, according to government statistics. This figure is rising, with around one in six people now working for themselves. There are advantages to being self-employed, but some workers could be missing out on benefits worth thousands of pounds compared to their traditionally employed contemporaries.

The average annual replacement cost of typical employee benefits is £9,586, according to calculations from Royal London. This means self-employed workers must earn almost £28 extra per day to match the benefits of employed workers. While some of the benefits used in the calculation aren’t regular occurrences, such as carer’s leave, others play an important role in financial stability.

So, what should self-employed workers focus on when trying to bridge the gap?

Sick pay (calculated replacement cost: £1,154)

As a self-employed worker, being sick usually means having to take unpaid time off work and delaying projects you’re working on.

In contrast, most employees can benefit from Statutory Sick Pay of £96.35 per week if they’re too ill to work. This is paid for up to 28 weeks. In addition, some employers will offer sick pay as part of their benefits, which may be an employee’s full wage, or a portion of it, for a defined period.

It’s important for self-employed workers to have an emergency fund to cover short-term illnesses. However, you also need to consider the impact a long-term illness could have. Financial protection can provide security when you need it most. When thinking about illnesses, there are two main options to consider.

  • Income protection: This would pay a regular income, usually a portion of your typical income, if you became too ill to work. It would provide an income until the policy ends, you return to work, or you retire. There is usually a deferred period, 12 weeks for instance, before the policy starts paying out, so it’s not suitable for short-term illnesses.
  • Critical illness cover: This type of policy pays a lump sum on the diagnosis of certain illnesses, such as cancer or a stroke. It can give you more freedom to take time off work and adjust or pay off large outgoings, such as your mortgage, but will not provide a regular income.

The cost of financial protection products will depend on your health and lifestyle. If you think you could benefit from such products or would like to discuss them further, please give us a call.

In addition to sick pay, some employees will also benefit from health insurance through their employer. While you can rely on the NHS, health insurance could enable you to see a medical professional quicker and potentially have access to a wider range of treatments. It is possible to take out private health insurance, but, again, the cost would depend on your health and lifestyle, as well as the level of cover.

Pension contributions (calculated replacement cost: £1,500)

Most employed workers are now automatically enrolled in a workplace pension, helping them save towards retirement. Employers must also contribute a minimum of 3% of an employee’s pensionable earnings, boosting their savings. Some employers will contribute more than the minimum amount.

While self-employed workers can open and contribute to a pension, they miss out on the employer’s contributions. For someone earning a salary of £30,000 with an employer matching their 5% contributions, this benefit is estimated to be worth £1,500.

While not benefiting from employer contributions, it’s still important for self-employed workers to have a pension. Your contributions will benefit from tax relief and be invested. The most important thing is to understand what retirement lifestyle you want and how a pension can help you make it a reality. A financial plan can mean your contributions are in line with your plans.

Death in service or life insurance (calculated replacement cost: £360)

“Death in service” cover is a type of life insurance policy provided by your employer that would pay out a lump sum to your loved ones should you pass away. While not all employers offer a death in service benefit, some do, and it can provide peace of mind and ensure your family is financially secure should the worst happen.

For self-employed workers with loved ones that rely on them financially, it is possible to take out life insurance that would provide the same level of security. You can select the level of cover you want, for example, so that it matches your mortgage. Again, premiums can vary, and your health will have an impact.

The importance of an emergency fund and financial planning

The research also highlights why it’s so important that self-employed workers have an emergency fund. While employees may benefit from things like bereavement leave, self-employed workers would need to take time off unpaid. Having a readily accessible fund means that you can take time off if needed without having to worry about how you’ll pay for essential outgoings.

Ideally, you should have three to six months’ of outgoings in an emergency fund to provide financial stability when you need it most. The money should be accessible so it can be used when the unexpected occurs. Often, a cash account is advisable for an emergency fund for this reason.

A financial plan can help make sure everything is on track. From short-term saving goals so you can take a holiday to long-term retirement planning, a financial plan can help you achieve aspirations and balance competing priorities. Please contact us if you’re self-employed and would like to discuss how a financial plan can help you reach life goals.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.

We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.

    Subscribe to our newsletter