Group Income protection is a valuable addition to any employee benefits package. For employees, it can help to relieve financial pressures and reduce money related stress.
Not only this, but it can help boost their engagement and productivity. So what exactly is it? And what makes it so valuable?
In our below guide, we’ll talk you through everything you need to know about Group Income Protection. What it is, how it works and why as a business you should consider putting a policy in place.
Group Income Protection pays a monthly income to an employee if they can’t work due to illness or injury. This could be something physical, such as a bad back, or mental health problems, like stress or depression.
As a benefit Group Income Protection:
Group Income Protection is incredibly important for businesses to have. According to The Office for National Statistics (ONS), illness or injury caused 185.6 million lost working days in 2022. This equates to around 5.7 days per worker.
While most employees are understandably worried about serious illnesses, it’s actually less critical conditions that most commonly keep staff off work.
The ONS says the top cause of sickness absence in 2022 was “minor illnesses”. These caused 29.3% of absences and consist of coughs, colds, flu, sickness, nausea and diarrhoea. Rounding off the top five causes are:
As an employer, you don’t have a crystal ball, so it’s impossible to fully plan and budget for sickness. With Group Income Protection, you know that your business could cope financially if an employee were to go off with long term sickness.
It’s not just important for you as an employer either. Most employees are entitled to Statutory Sick Pay (SSP) if they’re off work ill for 4 or more consecutive days. As an employer, you pay this for up to 28 weeks.
However, the standard rate of SSP is £109.40 per week. When you compare this to your staff’s salaries, it’s a small amount and most would struggle financially if they were off work. This is exactly why financial protection is essential.
Plenty of businesses provide Group Life Insurance to their staff. Although this is a great benefit, people are more likely to be absent due to illness than to pass away while working for you.
With this in mind, you can start to see just how valuable Group Income Protection can be.
Nick Nelms
Senior Consultant, Employee Benefits
UK employees are known to be under-protected. Leading insurer Liverpool Victoria found only 15% of working adults had Income Protection (IP). We also discovered in our 2023 Employee Benefits survey that just 4% get Income Protection from their employer. This is despite the fact that 18% of employees listed it as a benefit they would like to receive.
By offering such a benefit, not only will you provide employees with a benefit they actually want, you will provide them with peace of mind. They will know that if they are unable to work due to sickness or injury they could cope financially.
Not got enough time to read our guide, but want a quick expert overview of Group Income Protection? Our very own Nick Nelms, gives us the rundown on what you need to consider before buying a policy. Just hit play! 👇
As an employer, you would own and pay for a Group Income Protection policy. Once a policy is live, if an insured member of staff is unable to work due to sickness or injury, after a set amount of time (deferred period), the policy would start to pay out a monthly benefit.
This monthly benefit would be paid to you the employer, to then pass on to the employee via payroll. When the benefit gets paid, the level of it and how long it gets paid for, will all depend on the policy options you chose when setting up a policy. It’s important to note that adjusting these options will impact the cost of your policy.
The options that you will need to consider when taking out a policy include:
Another important factor to consider when setting up a policy is the definition of incapacity used. You’ll see 3 definitions of incapacity: Own Occupation, Suited, or Any.
These refer to an individual’s inability to work. The definition you choose will impact whether a policy pays out or not, so it’s vital to understand how they differ.
At Drewberry™, we recommend clients opt for Own Occupation as it’s the most comprehensive.
It ensures your employees can make a claim should an accident or sickness prevent them from doing their specific job. This is the ‘easiest’ definition to make a claim on, as staff only need to be incapable of doing their own role.
Joseph Toft
Senior Consultant, Employee Benefits
To put it simply, Group Income Protection will cover any long-term illness or injury that prevents an employee from working.
However, as mentioned above, what a policy includes will depend on the level of cover you choose. Not only this, each provider will offer slightly different things, however most will offer:
On top of core cover, some providers will also offer a range of additional extras. Some of which will be free, some of which you can add for an additional premium.
Group Income Protection policies often have a strong focus on managing sickness absence before it reaches a claim. Some insurers provide early intervention programmes and rehabilitation services as a result.
Managing a health concern before it progresses is key here. The longer someone has off work due to ill-health, the harder it is for them to return. Intervening early can help to reduce the likelihood of long-term absence, or in some cases, prevent absence at all.
You might find the following services included on the policy:
These forms of support aim to get workers back on their feet and return to work at a quicker pace.
Most importantly, staff can use these before they need to make a claim. This can prevent illness from escalating to the point where an employee takes time off.
As these services tend to be free, providing this support comes at no extra cost to you as their employer.
It’s a win-win situation for your business and your workforce. Group Income Protection can help to reduce financial strain for staff. But it also helps you to reduce absenteeism.
Joseph Toft
Senior Employee Benefits Consultant
Group Income Protection Insurance comes with a number of benefits, not just for your employees but for you as an employer too. We outline what these are below.
By providing your hard-working staff with Group Income Protection, it shows you value them and are there to offer support when they need it most. As a result, it can:
Not only this, a Group Income Protection policy offers tax relief, as it’s classed as an allowable business expense in the eyes of HMRC. We explain this a little more later.
Group Income Protection is highly valuable for your staff. It offers employees financial support should they need to take time off work if they suffer an illness or accident.
Income Protection (IP) also provides:
If a member of staff is unwell enough to take time off work, it can easily lead to financial hardship. Group Income Protection can help limit financial burden and their money worries.
Staff also don’t need to rely on SSP, which is often a minimal amount compared to their earnings.
There are a handful of factors which will influence the cost of Group Income Protection. Some of which can be adjusted to manage the cost, while others are fixed and can’t be changed.
It’s worth noting that you may not be able to get quotes easily online for this type of protection. This is because group policies are complex and dynamic.
There are some policy factors which we have touched upon above that you can choose when taking out a policy. Adjusting these options can impact the price you pay for premiums. For example, you can reduce the cost by:
EXPERT TIP 🤓
You can usually get a small discount if you’re able to pay your premiums annually rather than monthly.
Unfortunately, there are some factors that will impact cost that are simply out of your control. These include:
To give you an idea of cost, we’ve calculated the average price of Group Income Protection Insurance for two different employers.
These are only designed to give a rough idea of how much premiums could be. But the quotes below are a great example of how much it may cost you as an employer to provide Income Protection.
For personalised Group Sickness Insurance quotes for your business, don’t hesitate to get in touch. You can reach us on 02084327333 or email help@drewberry.co.uk.
Construction Firm | Bakery Firm | |
|---|---|---|
Location | Wales | Milton Keynes |
Number of Employees | 10 | 100 |
Level of Cover | 50% of Salary | 75% of Salary |
Payment Period | 2 Years | 2 Years |
Policy Cease Age | 65 / State Pension Age | 65 / State Pension Age |
Deferred Period | 8 Weeks | 13 Weeks | Cost | £8.90 | £6.26 |
Employers will find that HMRC taxes Group Income Protection differently to personal Income Protection.
Businesses can offset the cost of premiums against their corporation tax bill. So you’ll receive a lower tax bill. HMRC also doesn’t view Group Income Protection as a P11D / Benefit-in-Kind. This means there is no additional tax to pay with this type of cover.
Should an employee make an Income Protection claim, the benefit is paid to the employer tax free. The employer is then required to pass the funds on to the employee. The benefit is typically paid through PAYE. Therefore, it’s liable for tax, just like the rest of their monthly income.
To put it simply, no. Group Income Protection is not a mandatory employee benefit in the UK. Employers must pay Statutory sick pay, but anything above this is voluntary. For example, some employers choose to supplement statutory sick pay with company sick pay. This might be a specific number of days, weeks or months at full pay.
Group Income Protection is another voluntary option that employers tend to include so that once their company sick pay ends, a policy kicks in. This is to ensure that they can continue to provide financial security to employees until they fully recover.
Yes. The employer will have to agree what the eligibility conditions are with the insurer. Typically, these will be factors such as:
As an employer, you pay for and own a Group Income Protection Policy. In the event that an employee needs to make a claim, the benefit amount would be paid to your business. You would then pay the benefit on to the employee via payroll.
For an employee to make a claim on your company Income Protection, you need to submit a claims form. Both the employee and employer sections of the claims form must be completed.
Make sure you have the necessary documentation to hand when going through the claims process. This might be correspondence from the employee’s GP, test results, or GP fit notes, for example.
The claims form can be downloaded from the insurer’s website, or you can make a claim online.
As soon as it’s clear that an employee will be off work for longer than the deferred period, contact the insurer. The insurer can then get the ball rolling, so funds can be paid immediately if the worker is still off after the deferred period.
All UK employers are obliged to offer Statutory Sick Pay (SSP) if an employee is off sick. Eligible staff must earn an average of at least £123 a week and have been off for 4 consecutive days or more, including non-working days.
If you don’t have a company sick pay policy or an insured option, SSP is provided. This is payable by the employer for up to 28 weeks of absence.
If an employee needs more than 28 weeks off, Group Income Protection can act as a continuation of their sick pay.
Most of the time, the minimum deferred period on Group Income Protection is 13 weeks. You won’t be able to get an insurance policy that pays out sooner than this. This means you’d have to pay at least SSP for that 13-week period.
Once the Income Protection monthly benefit kicks in, you no longer have to pay SSP because the policy takes over your obligation to pay.
One question we get asked a lot by our clients is if employees can claim Employment & Support Allowance (ESA) at the same time as Income Protection. This is one of the main government incapacity benefits they offer.
In most cases, employees can still claim ESA. However, we advise checking how it will interact with the benefit they receive from the IP policy.
It’s possible that the insurer will reduce the payout to align with what ESA the individual is receiving. If there’s any doubt about eligibility or how it will affect a claim, it’s best to clarify with JobCentre Plus or the Department For Work & Pensions.
No, Group Income Protection is not considered a P11D / Benefit in Kind. This means there’s no additional tax for an employee to pay due to the company paying for cover.
Yes, plenty of insurers can cover employee pension contributions, as well as employer National Insurance Contributions. This offers your business and staff an extra layer of monetary protection.
For these to be covered, you’ll need to choose the option when setting up the policy.
In some situations, yes. It depends on the severity of the illness and how long an employee is expected to be out of work for.
An upfront lump-sum payment is possible, but this sits outside the standard terms of a group scheme. It’s best to speak to your insurer if this is something that is necessary for an employee.
Drewberry is an independent Employee Benefits brokerage, with access to all Group Sickness Insurance providers. Every insurer is different and no two are the same. Some suit particular sectors or businesses than others, for example.
With years of experience tucked under our belt, we have helped many businesses to set up their benefits. Our team works with every major insurer to provide you with a wide range of options and quotes. These insurance providers include:
As we’ve said, each insurer is different. So, what’s best for your company might be different to what is best for another. Speaking to an independent financial adviser can help ensure you set up the right Group Income Protection for your business.
To provide Group Income Protection to your workforce, you need at least 3 employees. But what if you don’t have 3, or you just want to insure a director? There is another option…
Executive Income Protection. This caters to directors, companies with under 3 employees, or a company wanting cover for just one worker. It is paid for by the employer on behalf of the employee and offers the same tax benefits as a group scheme.
For more information on Executive Income Protection, please don’t hesitate to get in touch. Pop us a call on 02084327333 or email help@drewberry.co.uk. One of our qualified experts will explain your options in a clear, understandable manner, so you don’t have to try to figure out the policies.
Employers have a lot of choice when setting up their company Employee Benefits. So much so, it can become a bit of a headache. Setting up group policies is a complex beast to tackle, as many business factors have to be considered.
At Drewberry, we do all the heavy lifting for businesses in the UK. It doesn’t matter if you’re a small business or a larger corporation, we can help set up and keep on top of the admin. Letting us, the experts, do all the nitty-gritty work means you can focus on doing what you do best—run a successful business.
If you’d like tailored advice on your employee benefits or need help setting them up, drop us a line on 02084327333 or email help@drewberry.co.uk, and we’ll get you started.
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.