No one expects to get injured or sick but it happens and it can have a significant impact on your household finances. That’s why it pays to know where you stand.
If you get sick or injured, you have a statutory entitlement to five days’ sick pay a year – about the duration of a flu. And this is an improvement on what was in place – just three days annually up to January last year. A planned increase to seven days was stalled by Government last month amid protests from business.
Statutory sick pay is paid at 70 per cent of your normal pay, up to a maximum of €110 a day – the legal minimum your boss must pay. Some employers will have more generous schemes, but employers can’t give you less than the statutory amount.
You must be an employee in the job for at least 13 weeks and be able to provide a sick cert.
“A generous scheme would be anywhere between 21 and 28 days where the employer is paying the sick pay directly,” says employment lawyer Barry Crushell. “That may be at the statutory rate of €110 a day, or it may be the full rate of pay,” he says.
Few employers pay for sick pay from their own coffers after a month, he says. Where this perk is available, the employer is probably paying a third-party insurer to provide the cover. The insurance company pays the sick pay to the employee.
“These policies will cover absences due to illness, typically over a six-month period,” says Crushell. “After that, in my experience, insurers tend to significantly scrutinise the condition of an employee who is availing of sick pay,” he says.
“Employees can find themselves in a vulnerable position after six months where the insurance company is trying to divest themselves of the liability,” he says.
“After a period of time, the illness of the employee doesn’t necessarily become a concern for the employer because it’s an insurance company matter. The insurance company can often take a more robust, aggressive and inquisitorial approach to the employee’s illness to ensure they are not continuing to pay if they no longer deem it’s warranted.
“I have employees coming to me because the employer is saying the matter is out of my hands and the insurance company may be refusing to pay after a particular period of time.”
An employer, with the best of intentions, might try to support you for as long as possible, but they are under no legal obligation to do so beyond the five days statutory sick pay or in accordance with their own policy, he says.
Where the employee has mostly recovered and wants to return to work on a phased basis, on partial pay for example, things can go awry too, says Crushell.
“There can be a disconnect between the employer and the insurance company about the availability of an employee to work. We have encountered instances where insurance companies are not willing to pay the difference. They say their cover is based on the employee being completely incapacitated for work.”
If you are off work sick for more than five days, you should apply for state illness benefit whether your employer pays you or not, says the Department of Social Protection.
Illness benefit is a weekly payment of up to €244, depending on your earnings and on any adult or child dependents you may have. It’s paid for a maximum of two years to those with sufficient PRSI contributions.
How to prepare
Serious illness is a “black-swan event” for which you should try to prepare, says Lorraine Cooke of Jigsaw Financial solutions. It’s rare and unexpected, but it can have a significant impact.
“In order of priority, I tell people to put aside emergency cash for that unforeseen event; that’s a minimum of three months net salary,” says Cooke.
The right insurance policy can keep a roof over heads and bills paid. She recommends taking out income protection.
“Your income is your most valuable asset and you need to ensure it’s protected,” says Cooke. “If you get a short-term or long-term illness and your income is not protected, you are going to be financially impacted.”
Depending on your policy, income protection can pay up to 75 per cent of salary, less social welfare benefits, up to a maximum age of 70. The payment is treated as income for tax purposes.
Some people are unaware they have cover as part of their employment contract. Cooke has seen plenty of examples of this.
For those taking out cover themselves, the cost of the premium, fixed at the time you take out cover, depends on a number of factors.
“It’s very much determined by your age, your health and the amount of income you are covering, when the policy is going to start to pay out and when the policy will expire,” says Cooke.
The good news is that there is tax relief on income protection premiums. And if you are paying 40 per cent tax, relief is paid at this rate.
Insurers will do at least a mini medical – recording height, weight and blood pressure, says Cooke.
Policyholders decide their own “deferred period” – the amount of time that must elapse before the policy starts paying out, basically how long you can get by without a salary.
“You might be paid sick leave at work for a period, you might have savings, or a partner may be working and you don’t need it to kick in immediately,” says Cooke.
“The default deferred period before a claim can be made is four weeks with the longest being 52 weeks,” says Cooke.
“If you are paid by your employer at six weeks’ full pay and six weeks’ half-pay, for example, you might opt for a 12-week deferred period – the longer the deferred period, the cheaper the premium.”
Shop around and compare quotes is her advice.
Critical illness cover
Critical illness cover, or specified illness cover, is paid as a tax-free lump sum in the event of a person being diagnosed with an illness specified in the policy.
These include things such as heart attack, stroke, loss of limbs or sight, and cancer. If your illness falls outside those listed in the policy, cover will be useless, which is a regular bone of contention.
“The minimum amount of cover that somebody should have is two years of net salary because that’s typically the rehabilitation period if someone is going through treatment or surgery,” says Cooke.
Insurers can be rigid about illnesses covered and payouts.
“Carcinoma in situ of the breast is a big claim the insurance companies are seeing coming through. That is a woman having a lump in her breast that is not cancerous but it may still need to be removed with possibly chemo, but it’s not essentially cancer yet,” says Cooke.
“Insurance companies were getting a lot of claims in and were declining them until they decided to include them as ‘partial’ payments where they will pay out, say €15,000, where something is classified as carcinoma in situ. If she went on to develop cancer, the balance of her specified illness cover would be paid out,” says Cooke.
Data from Irish Life on its critical illness cover claims shows some new trends.
While cancer remains the leading cause of claims by women, other health issues such as heart conditions, strokes and other serious illnesses are becoming increasingly common among women, says Martin Duffy, head of underwriting and protection claims, at Irish Life.
Men accounted for 59.5 per cent of all specified illness cover claims to Irish Life last year. The top three illnesses men experienced were prostate cancer (malignant), heart attack and stroke.
For women claimants, it was breast cancer (malignant), stroke and heart attack.
Mental health difficulties are not regarded as a specified illness, says Cooke. They can, however, be covered under income protection policies.
“Since Covid, mental health is now the biggest claim under income protection policies,” says Cooke. “It was musculoskeletal issues like back and neck, but the majority of claims now are actually for mental health,” she says.
Being sick costs
Nobody wants to pay another monthly direct debit for an insurance policy but it is worth at least game-planning how your household might manage if an earner, or the person who minds children, gets sick.
A 2019 study by the Irish Cancer Society estimated the average cost to someone dealing with cancer was €756 a month, rising to more than €1,000 in some cases.
The cost comprised things such as GP and consultant fees, travel, parking and hospital stays, extra heating and lighting costs, additional personal care and clothing costs, childcare costs and the loss of income, according to the survey.
The average drop in the income of cancer patients was €1,527 per month, or €18,323 annually.
One in three of those diagnosed changed their employment status, one in four changed their approach to work, and 45 per cent of carers’ employment was affected, it found.
Return to work
For those who are sick, dealing with their employer or an insurance company can add to the stress.
Be diligent about providing medical certs to your employer, advises Crushell. These may be required on a weekly basis, though generally less often for long-term illness.
Sometimes, an employer will take the approach of filling the employee’s position with a temporary hire. The sick employee may be kept “on the books” as an employee while not being paid.
“For employers, the least risky option is to keep the employee on the books for an indefinite duration rather than take any action that might result in a legal claim, like unfair dismissal,” says Crushell.
There have been 32 cases in the Workplace Relations Commission under sick leave legislation, he says.
An employee who has recovered and wants to return to work can ask for reasonable accommodation, or modification to working terms and conditions.
Keep your employer appraised of events, Crushell advises. If you don’t tell them how your illness affects your work and what modifications you might need, the employer is under no legal obligation to provide necessary adjustments, he says.
Where an employee is no longer able to do the job for which they were hired, and no reasonable accommodation can be met, the employer is within their rights to dismiss the employee on the grounds they no longer have the capability to perform the role for which they were hired.
