Can We Get Group Income Protection?
While it varies from insurer to insurer, you’ll typically need at least five full-time staff to get Group Income Protection.
To add employees to a group policy, they must meet some common minimum requirements:
- Employees must be within the minimum and maximum entry age range for the policy
- Staff must be eligible to work in the UK and have a UK working contract
- They must be an active employee at the business providing the scheme.
If preferred, you can add additional stipulations before an employee becomes eligible for cover. For example, this might include working for the company for a set period or being above a certain pay grade / status within the firm.
Income Protection For Small Businesses
You may not have enough employees for Group Income Protection. If so, you could consider Executive Income Protection, which covers directors of small companies.
It has many similarities to Group Income Protection, including the fact that the business owns and pays for the policy. However, the insurer underwrites the policy individually rather than on a group basis.
This means that each individual applying for cover will need to answer medical questions before the insurer will cover them.
How Much Does Group Income Protection Cost?
There are a range of factors that will impact the cost of Group Income Protection. You can adjust some to manage the cost of cover. However, others are fixed and can’t be changed.
Key Adjustable Policy Options
- Level of Cover
Most insurers allow you to protect between 50%-80% of gross salary. The more of your workers’ salaries you wish to cover, the more Income Protection costs.
- Deferred Period
The deferred period is the time that passes between an employee first being off sick and the insurer paying a claim. The typical deferred period starts at 13 weeks and employers usually align this with any sick pay they offer. The longer the deferred period, the lower the monthly premiums.
- Length of Payout
The payout can be limited to 1, 2 or 5 years or until retirement age. The longer the benefit payment period, the higher the cost of premiums.
- Include National Insurance and Pension Contributions
In addition to gross salary you can opt to cover employer National Insurance and employer pension contributions. These options will increase the cost of cover.
- Premium Frequency
You can usually get a small discount if you’re able to pay your premiums annually rather than monthly.
Factors You Can’t Control
The older your workforce, the more likely they are to suffer illnesses and injures and the more expensive your premiums will therefore be.
- Industry and Occupation
There are some industries which are considered higher risk. For example, builders are more at risk of suffering an on-the-job accident than a desk worker. Industries which pose a higher claims risk have higher premiums per employee.
The Importance Of ‘Own Occupation’ Cover
Opting for Own Occupation cover ensures your staff can make a claim should accident or sickness prevent them from doing their specific job.
There are alternative, lesser definitions; however, we don’t typically recommend these, which are laid out briefly below.
- Suited Occupation
The employee must be incapable of carrying out the duties of their own occupation or any other job they are qualified for.
- Activities of Daily Living
The employee must be incapable of completing a certain number of everyday tasks such as climbing stairs or signing their name. This is the hardest definition for your staff to make a successful claim on, so we tend to say it’s best you avoid it.
Example Cost Of Company Sickness Insurance
Below is an average cost of Group Income Protection for two different businesses. However, these are only designed to give a rough idea of the cost of cover. For personalised quotes for your company, don’t hesitate to get in touch. You can reach us on 02084327333 or email email@example.com.
How Is Group Income Protection Insurance Taxed?
HMRC taxes Group Income Protection differently from personal Income Protection.
You pay for personal Income protection from net income, i.e. income that’s already had tax and National Insurance deducted. Insurers therefore pay claims tax-free on personal policies.
However, as Group Income Protection is paid for by employers, who can usually write off the cost against corporation tax, HMRC taxes Group Income Protection when a claim is made.
The insurer pays the claim to the employer should a worker fall ill. The employer then distributes the funds to the worker in the appropriate manner, typically through PAYE. The PAYE system deducts tax accordingly.
Is Group Income Protection a P11D Benefit in Kind?
It is not normally considered a P11D / benefit in kind. There’s therefore no additional tax to pay in most circumstances from an employee’s standpoint.
Who Are The Best UK Group Sick Pay Insurance Providers?
We are an independent employee benefits adviser who has access to all of the best UK Group Income Protection providers. No two are the same and some suit particular sectors or businesses better than others.
For all our clients we regular review the market to ensure they have the most fitting and cost effective policy for their employees.
How Does Group Income Protection Fit With an Employee Benefits Package?
Group Income Protection isn’t always the first benefit companies introduce — this tends to be reserved for Group Life Insurance or Business Private Health Insurance.
However, it’s beneficial for employees, providing them with extended sick pay cover. Meanwhile, employers also benefit. This is through absence management tools and other helpful additional benefits designed to speed employees’ return to work and reduce the burden of sickness absence on the business.
Group Income Protection and Company Sick Pay
Group Income Protection is designed to work alongside your company’s sick pay policy.
It kicks in after any period of full sick pay your company offers lapses to provide fuller and more extended coverage than perhaps you’d be able to afford as a business without insurance.
Group Income Protection can also step in to act as an alternative to Statutory Sick Pay. SSP is the minimum amount you are legally obliged to offer employees for up to 28 weeks.
You could therefore discharge some of this liability after the end of the deferred period by having Group Income Protection cover your workers instead of Statutory Sick Pay.
Group Income Protection vs Group Critical Illness
Group Income Protection pays out a regular monthly income if an employee falls ill. This can be for any medical reason that warrants time off work, from a bad back to a more severe condition such as cancer.
Group Critical Illness Cover, on the other hand, only pays out once. This is a single lump sum.
Also, the worker needs to be critically ill to make a claim under a Group Critical Illness policy. The policy terms define critical illnesses, which are usually limited to very serious diseases. For example, cancers, heart attacks and strokes are the top reasons for a Critical Illness Insurance claim.
Meanwhile, top claims on Group Income Protection policies include mental health conditions and musculoskeletal problems.
Other Employee Benefits
As well as Group Income Protection, many companies consider:
- Death in Service Insurance
Pays out a lump sum if an employees passes away while working for your organisation.
- Group Critical Illness Cover
Pays out a lump sum if a worker suffers a critical illness while working for your organisation.
- Corporate Health Insurance
Pays for private healthcare in facilities across the UK, offering faster access to medical treatment than the NHS can provide in many cases.
Client Story: Meet Profile Pensions
Profile Pensions introduced a Death in Service scheme for their workforce and feel it’s made a real difference.
“Our employees get comfort from knowing it’s there and we’re proud to provide that,” says Michelle Donlin, Profile Pensions’ HR and Office Manager. “We work hard to provide good benefits to our staff and show a commitment to our employees, so introducing employee benefits was really a logical step.”
George Hay, an employee for 3 years, agrees. “I’ve just had a child, so it means a lot to have that peace of mind that if the worst happens, my family will be supported with four times my annual salary. It’s not something I hope will ever be needed, but it does take a big worry away for me.”