Swine flu alert – have you inoculated your finances?

Published on Saturday 1 August 2009 14:15

Worse may be on way, so act now to limit impact on your pocket, writes Teresa Hunter

HEALTH experts are bracing themselves for a surge in swine flu cases within weeks when children return to school, with sickness intensifying throughout the autumn and winter, as normal seasonal flu also kicks in.

Families should begin planning now how they will cope with enforced sickness absence to care for children or elderly relatives, or more prolonged loss of earnings if schools are shut to prevent the spread of the disease. Otherwise, the virus will sabotage their finances long after they have recovered from what, for most, will be a mild illness.

Companies have already drawn up contingency plans to deal with an anticipated quadrupling of absenteeism, with many firms insisting on a minimum home quarantine of a week at the first sign of symptoms. But staff should also be thinking of how they could cope with a drop in income, if a sustained family quarantine forces them to take unpaid leave. The financial fever will be worse still if schools and nurseries are closed, or child minders shut up shop.

Mercer associate Kate Bawden, a health expert, who has been advising firms, said: "It will be crunch time when the children get back to school. The fear is, although the illness has been mild so far, it could become more severe in the winter."

Some forecasters have also produced gloomy forecasts for what a serious outbreak could mean for the economy, in terms of lost production, but also reduced consumer demand, as shoppers boycott the high street, restaurants and theatres for fear of infection.

The nascent revival in the housing market could also become house-bound. Halifax economist Martin Ellis said: "If people aren't visiting properties this could affect sales."

Scotland on Sunday has drawn up a ten-step battle plan for inoculating your finances, to prevent a few sneezes turning into a serious financial headache.

1. Get to grips with sick pay

If you fall ill yourself, employees are entitled to sick pay for 28 weeks, although the minimum an employer is obliged to pay by law is 79.15 per week, or 15.83 daily.

Many companies will pay your full wages, but precisely what you qualify for and for how long depends on your employment contract.

To claim sick pay, you simply inform your employer you are ill, thereby "self-certifying" your illness for the first seven days. After that, you will require a doctor's medical certificate to continue being paid, as things stand.

The government has discussed whether self-certification should be extended to 14 days in the event of an emergency to prevent clogging up surgeries.

Firms, however, are concerned disruption to systems could result in individuals not being paid at all.

Agency workers have the same right to the minimum 79.15 payment as full-time staff. But their entitlement to higher compensation will depend on their contract with their agency.

If you fall ill and receive only the statutory minimum, you can claim income support. However, this will be means tested and will not cover big bills such as mortgage payments.

2. Survival for self-employed

Those who work for themselves can be particularly hard hit because no-one is going to make up their wages. There is no sick pay support for them.

Some contribute regular premiums to income protection policies, which pay out for sustained periods of ill health. Unfortunately, these are unlikely to be of use to plug holes in the income gap caused by swine flu, which is a short-term illness.

Sickness policies only pay out after a month or even longer. Take particular care if looking for longer-term security that you always buy a contract which covers the self-employed because many exclude them.

The bigger worry is that swine flu will lose contracts, not least if you work in teams, of builders, for example, and get sick by rotation. Many self- employed will have no option but to work through as much as possible, taking the minimum amount of time off.

3. Set aside a safety cushion

Never is that rainy-day fund more important than in times of illness. Whether you are employed or self-employed, expect to see your pockets hit.

Keep a cushion of cash, at least one month's salary, in an instant access savings account.

4. Pay your bills on time

Take a careful look at the bills you will have to pay over the next six months and set up systems to ensure they get paid, even if you are housebound.

Set up direct debits on utility bills, credit cards, mortgage, rent and council tax to make sure these are paid without incurring penalty charges. If your bank account has an online or telephone facility, now is the time to set one up, not when you feel at death's door.

5. Child care contingency

Child care could become a major problem if your youngsters fall ill in rotation or schools close for any length of time.

Employers are unlikely to be sympathetic, when they are already struggling with increased absenteeism. Don't expect generous gestures.

You will either have to use up holiday entitlement, or ask for unpaid leave. In this case, a financial cushion will be vital. Speak to your relatives to see if they could step in, or sound out friends for mutual support. You may also need to explore emergency child minders for back-up.

6. Tax matters

If your wages fall sharply you may qualify for extra tax credits. Unfortunately that will not be forthcoming until the end of the tax year, when your entitlements are re-examined.

You may be able to get a tax refund sooner, as your earnings for the year will have dipped. Write to your tax office at the earliest opportunity.

Similarly, notify HM Revenue & Customs if your earnings are down, when you fill in your self-assessment form. Tax is normally paid in advance, on account and based on your previous year's earnings. However, if your current earnings are lower then you should be able to get your payments on account cut.

7. Update your life assurance

No one is suggesting anything but a tiny number of cases, with underlying complicating factors could die, but it is a timely reminder to dust down your life insurance.

Straightforward term assurance has to be the best value financial product, and although the industry says it is keeping a watching brief, the price has not increased so far.

8. Holiday insurance

Changing your mind about travelling because of worries about infection is not covered. But you will be compensated if you have to cancel because you get the flu, or indeed if you are turned away by an airline because of flu-like symptoms, as some carriers, including Virgin and BA, have done.

Insurers are accepting your flu emergency number as proof of illness.

Problems arise if you have to cancel because of illness of a close relative or one of your travelling companions. With flu around, read this section carefully, as cover differs, and select a policy which gives the widest protection

9. Medical insurance

This will be of little help as you are only likely to be hospitalised as a result of underlying complications, and insurance explicitly excludes previous conditions.

10. Stock markets

Andrew Milligan, head of global strategy at Standard Life, says stock markets are currently ignoring the swine flu story, with the exception of pharmaceutical companies. GlaxoSmithKline is expected to reap 1.6 billion from Relenza, the second-biggest-selling antidote and is developing a vaccine. It is also producing a mask, and an anti-viral spray for the mask.

Against this, influential bodies such as Ernst & Young Item Club and Oxford Economics predict it could trigger a relapse into recession.

Milligan says: "The problem is this is all based on guesstimates and back of the envelope calculations. If the disease progresses along the lines we have seen so far, the impact will be relatively light. But if the worst scenarios were realised, the numbers catching it rose sharply and the mortality rate changed, then it could have more effect. The way other organisations behave will be crucial. If schools start to close and employees have to stay at home to take care of children, or indeed the elderly, then productivity could be hit."

Bryan Johnston, of Brewin Dophin, says: "The evidence suggests we will get through this relatively lightly. However, I believe after the good run the stock market has enjoyed recently, we are overdue a small correction. In the longer term, I am convinced the building blocks are in place for a sustained bull market."