Income protection vs sick pay for company directors
Statutory Sick Pay provides some income if illness prevents you from working, but the amount is relatively small, and it only lasts for a limited period.
Executive income protection can provide a much higher monthly income. Depending on the cover you choose, a claim could be paid for several years or up to the policy end age.
For company directors, there’s another important difference. SSP is based on PAYE earnings and doesn’t take dividend income into account. Executive income protection may cover both salary and work-related dividends.
Income protection vs sick pay at a glance
| Feature | Statutory Sick Pay | Executive income protection |
|---|---|---|
| Amount paid | Up to £123.25 a week or 80% of average weekly earnings if lower | Based on an agreed proportion of insured earnings |
| Dividend income | Not included | May be included, subject to insurer rules |
| When payments begin | From the first qualifying day of illness | After the selected deferred period |
| Maximum duration | 28 weeks | A fixed claim period or potentially until the policy end age |
| Who pays? | The limited company as employer | The insurer pays the limited company |
How Statutory Sick Pay works for directors
A limited company director can qualify for Statutory Sick Pay if they’re employed by the company and meet the normal eligibility rules.
For the 2026/27 tax year, SSP is £123.25 a week or 80% of average weekly earnings, whichever is lower. It’s paid by the company for up to 28 weeks and is subject to Income Tax and National Insurance.
The Lower Earnings Limit for SSP was removed from April 2026. However, this doesn’t necessarily mean a director on a small PAYE salary will receive the full £123.25 weekly rate. If 80% of their average weekly earnings is lower, that’s the amount they’ll receive.
Dividends don’t count as earnings for SSP.
This is particularly relevant to directors who take a small salary and most of their income as dividends. Their normal household income could be much higher than the amount of SSP they’ll receive.
You can check the current rates and rules on GOV.UK.
How executive income protection differs
Executive income protection is paid for by the limited company and covers a director or employee if illness or injury leaves them unable to work.
The company owns the policy and receives the benefit if a claim is accepted. It can then use the money to continue paying the insured director.
Depending on the insurer, cover may include:
- PAYE salary;
- work-related dividends;
- employer National Insurance contributions; and
- employer pension contributions.
For a director who takes most of their income as dividends, the difference between SSP and the amount covered by an executive policy can be substantial.
Income protection doesn’t normally start paying immediately. You choose a deferred period when the policy is arranged, such as 4, 8, 13 or 26 weeks.
The longer you can manage using SSP, savings or money already available in the company, the longer the deferred period you may be able to choose.
How long can income protection pay?
SSP stops after 28 weeks.
Executive income protection can last considerably longer. Short-term policies may pay an individual claim for one, two or five years, while long-term cover can potentially continue until you recover or reach the policy end age.
This matters if you’re considering what would happen after a serious illness or injury rather than a relatively short period away from work.
Our guide to short-term and long-term income protection compares the two options.
Does the company receive tax relief?
Company-paid premiums may qualify for Corporation Tax relief, although this depends on the purpose and structure of the policy.
If you make a successful claim, the payments normally go to the company and are generally taxable. The company can then use the money to continue paying you.
See our guide to executive income protection tax for more on premiums and claim payments.
Can you rely on SSP alone?
That depends on how long you could manage on the amount available.
At the maximum 2026/27 rate, SSP provides £123.25 a week for up to 28 weeks. A director on a low PAYE salary could receive less.
If most of your normal income comes from dividends, SSP won’t replace any of that dividend income.
You may have enough savings or company reserves to cover a short period away from work. The bigger question is what would happen if you couldn’t return for six months, a year or considerably longer.
Executive income protection can provide cover beyond the 28-week SSP period, with the amount based more closely on your insured earnings.
When choosing a policy, look at how much of your salary and dividends can be covered and how long you could manage before you needed payments to start.