Types of Employee Benefits
Death in Service Insurance
Death in Service — also known as Group Life Insurance — pays out a lump sum (equal to a multiple of the employee’s salary) to the loved ones of an employee should they pass away during their tenure at your company.
The payout is tax-free providing it is correctly distributed (first delivered into a trust owned by the employer and then distributed to the beneficiaries).
In most cases, a scheme will be set up so each employee will be covered right up to their retirement which will be aligned with their state pension age.
Group Life Cover is the first employee benefits insurance many companies introduce because it is fairly inexpensive while its value to employees is perceived to be much higher than its actual cost.
Policies are also easy to manage and having all of your employees covered under one policy means that no one is left lacking valuable cover.
Why Profile Pensions Chose Group Life Insurance…
Why choose Group Life Insurance for your business? It provides security for your employees’ loved ones, as thriving pensions firm Profile Pensions found out when they implemented their own scheme.
It proved so popular among staff that Profile Pensions later looked to increase their benefit, from 3 times salary to 4 times salary after the scheme had been in place for a few years.
“Getting Group Life Insurance in place was a bit of a no-brainer,” says Michelle Donlin, Profile Pensions’ HR and Office Manager. “Our employees get comfort from knowing it’s there and we’re proud to provide that. We work hard to provide good benefits to our staff and show a commitment to our employees, so introducing an employee benefit was really a logical step.”
Business Health Insurance
Provides employees with access to private medical facilities allowing them to bypass the NHS and receive treatment when they need it most.
When an employee is diagnosed with a health problem and requires treatment, they can use their Health Insurance to have their treatment privately.
For an extra premium, employers can add Outpatient Cover to their Group Health Insurance and further speed up the process of having a condition diagnosed prior to treatment.
Business Private Medical Insurance has a range of benefits that can greatly reduce the stress for employees suffering from health problems and get them back on their feet as quick as possible:
- Reduced waiting time for treatment
- Extended visiting hours
- Freedom to choose which hospital or professional provides your treatment
- Advanced control over when you undergo your treatment
- Access to the latest procedures and medications.
Group Income Protection
If an employee is suffering from a health problem that prevents them from working, a Group Sickness Insurance policy will pay out a monthly benefit to cover a percentage of their monthly pre-tax income.
Given the very real risk of suffering a long-term illness, it’s a valuable insurance to have.
Claims are paid to the company; it is then up to the company to distribute the benefit via PAYE or the standard method used to distribute the employee’s salary. As a result, this means that benefits are typically taxed as income.
Employers often have the option to protect their National Insurance and pension contributions.
These benefits can be claimed for up to 1-5 years with a short-term policy or until the employee reaches retirement age / leaves the company with a long-term policy.
Getting Own Occupation Cover…
If you purchase a policy with an own occupation definition of incapacity, your employee will be able to claim these benefits provided their health problem prevents them from working in their specific occupation.
A different definition of incapacity may mean that an employee will not be able to claim if your provider considers them well enough to work in other occupations.
Group Income Protection has a deferred period which defines how long employees need to be out of work for before they can claim their benefits. You would usually set this to align with the employee’s sick pay so the employee can begin claiming their benefits as soon as their sick pay runs out.
Group Critical Illness Insurance
Group Critical Illness Insurance pays out a tax-free lump sum to employees that are diagnosed with a serious illness.
Similar to Group Life Insurance, the payout of a Group Critical Illness policy is usually set to a multiple of the employee’s income, often 2-3 times their gross basic salary.
If an employee suffers one of the ‘critical’ illnesses as defined by the policy, the insurance pays out a tax-free lump sum.
While the payout of a Group Critical Illness policy can be of great help, the limited number of conditions covered by the policy means that some employees suffering from certain medical problems may not be able to claim. That’s where Group Income Protection can be more useful.
Another way these benefits help with employee engagement, retention and morale is through the employee assistance programs that come with many employee benefits.
Why Employee Assistance Programs Are Important
Employee assistance programs provide free services and additional benefits that employees can claim to help them through difficult times in their lives, such such as:
- Legal advice
- Financial support / guidance (e.g. debt advice)
- Medical advice
- Remote GP services
- Bereavement counselling
- Face-to-face counselling / CBT
- Rehabilitation services / physiotherapy
- Hospitalisation benefits
- Career break benefits.
These can provide comfort and support for employees and their families, which can have a range of benefits as a consequence.
When Aviva performed a study on the effects of their Employee Assistance Program, they found that 75% of employees that were supported by the programme returned to work within 6 months if they were absent due to illness or injury.
Employees with access to these programmes can use the services at any time, even if they are not currently making a claim.
This means that Employee Assistance Programs can be used to not only help employees in difficult situations, but also help them avoid these problems in the first place.
Relevant Life Insurance for Micro Businesses
If you own a small business, you may not have enough employees to qualify for a Group Life Insurance policy. If that is the case, Relevant Life Insurance is an alternative option.
Relevant Life Insurance works in a similar way to Group Life Insurance because it is purchased by an employer on behalf of an employee.
The difference between the two is that Relevant Life policies are individual covering one person per policy, while Group Life policies covers upwards of three employees under one policy.
The benefits of Relevant Life Insurance is that you can tailor the cover per policy which can be particularly useful for micro companies where there may be a single director.
It is important to bear in mind with a relevant life policy the employees will be underwritten on an individual basis rather than as a group, which could push up the cost of premiums for older, sicker employees.