Group income protection policies can help lift productivity and reduce ill health in the workplace.
Absent employees can be a drain on a business; not just in terms of cost, but also on levels of employee productivity and morale.
The introduction of a group income protection policy, however, can help address these threats to a business, says Steve Bridger, head of group risk at Aviva UK Health.
Group income protection is an employee benefit that provides a replacement income if an employee is absent from work through long-term illness or injury.
As well as improving productivity and morale, this type of policy also provides business owners with access to initiatives that could help reduce ill health in the workplace – and cut both costs and administration.
The stark reality for business owners is that one in 10 people in the UK will be unable to work for more than six months as a result of illness or injury at some point during their working lives.¹
Income protection offers employees a financial back-up plan, as well as invaluable peace of mind, in the event of an extended period off work due to ill health; for employers, it can mitigate the financial risks of long-term absence that costs businesses more than £3.1 billion a year.²
John Letizia, head of public affairs at group life insurer Unum, points out that income protection is one of the few employee benefits that will offer some payback to employers if they need to claim.
“They are not required to pay occupational sick pay and they make indirect cost savings associated with the replacement of staff, recruitment and absence management,” explains Letizia.
Indeed, group income protection can usually be obtained for around 1% of payroll – depending on the level of benefits chosen – and the premiums are classed as a business expense to reduce Corporation Tax.
Letizia suggests that smart companies should consider offering group income protection as part of a comprehensive wellbeing strategy to show staff they care.
“Add-ons, such as complementary support services, can be included in a policy to provide a holistic welfare package,” says Letizia.
“Such support may include advice on combating stress, giving up smoking or healthy eating – as well as services aimed at providing early intervention or specialist rehabilitation support to facilitate a speedy return to work.”
The growth of an ageing workforce is likely to bring new challenges for employers. Welfare initiatives will certainly help both employee and employer meet these increased demands on older bodies and minds.
“When employees feel well cared for, they are more engaged, more productive and more likely to stay with the organisation,” adds Letizia.
“The cost of replacing an employee with a salary of more than £25,000 is £30,614, so offering a benefit which is known to improve staff retention makes sound business sense.
But the benefits to the employer aren’t purely financial. The retention of experienced staff within a business minimises disruption, and a consistency in the management of long-term absenteeism ensures that the organisation meets its ‘duty of care’ obligations as set out in the Equality Act.
Of course, it is important to communicate effectively the benefits of group income protection to staff. Unum research has found that failing to tell staff about benefits on offer is costing UK companies £2.7 billion a year through increased staff turnover and sickness absence.
“Employers should let staff know that they have group income protection and explain the benefits –and do this throughout their time with an organisation and not just when they first join,” says Letizia.
- Group income protection can also include the option to cover associated expenses, such as pension scheme contributions and employer’s National Insurance.
- Typically, the maximum benefit available is 80% of gross salary (maximum benefit £350,000 a year), payable up to the age of 70.
- Benefit payments can start after eight weeks of incapacity, although a deferred period of 13, 26 or 52 weeks is more common for group income protection.
1, 2 Unum, February 2015
Aviva UK Health and Unum are product providers for St. James’s Place.