What Is Group Income Protection? How Much Does It Cost?

4.9 / 5
Rated 4.92 / 5 by 2836 client reviews

09-09-2020

Group Income Protection Insurance is an employer paid benefit which works in tandem with your company sick pay policy. It is designed to cover a proportion of an employee’s gross income should they suffer an accident or sickness that prevents them from working in their current job role.

Protects against any illness or injury stopping an employee from working.
Works with and complements your business’ sick pay policy.
Covers up to 80% of employees’ salaries.
The business owns and pays for the policy for its workers.
Usually comes with additional services to help manage sickness absence more effectively.
Supports your workers through an emotionally, physically and financially difficult time.

Do We Need Group Sick Pay Insurance?

According to the Office for National Statistics (ONS), illness or injury caused 141.4 million lost working days in the UK in 2018. This equates to around 4.4 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 2018 was “minor illnesses”. These caused 27.2% of absences and consist of coughs, colds, flu, sickness, nausea and diarrhoea. Rounding off the top five causes are:

19.7%: Musculoskeletal problems (for example, bad backs)
13.7%: ‘Other’ conditions (for example, accidents, infectious diseases, skin disorders and diabetes)
12.4%: Mental health conditions
6.1%: Gastrointestinal problems

Both mental heath conditions and musculoskeletal problems are in the top five causes of workplace absence. These can be long-term conditions requiring weeks or even months off work. This is despite them not being as ‘critical’ as a heart attack or cancer diagnosis.

What About Statutory Sick Pay?

Most workers are entitled to Statutory Sick Pay (SSP) if they’re off work ill for 4 or more consecutive days. You as the employer pay this for up to 28 weeks.

To be eligible, a worker must:

Be earning at least £120 per week
Be classed as an employee and have done at least some work for the employer.

The standard rate of SSP is £95.85 per week. Clearly, this is only a minimal figure that would see most workers struggle financially.

Supplementing Employees’ Statutory Sick Pay

Employers who want to further support staff will often supplement SSP with some form of occupational sick pay. This might be a set number of days, weeks or months at full pay.

Group Income Protection goes a step further than this, kicking in after the end of occupational sick pay to support those off work in the longer term.

Can Employees Still Claim ESA?

In most cases the answer is yes, you can claim both.

This is because ESA is usually contributions-based rather than income-based. This means it’s based on your National Insurance contributions record over time rather than your earning capacity.

However, in some cases ‘old-style’ ESA can be income-based. If there is any doubt about which one you qualify for and whether it will impact your claim, clarify this with your local Job Centre Plus or the Department for Work and Pensions.

The Benefits of Group Sick Pay Cover

Offering this cover provides staff with the clear signal that you value them and are there to support them when they need it most.

Furthermore, an impressive benefits package can:

Attract new employees
Improve employee retention and engagement
Reduce stress
Manage staff absences.

A Cost / Benefit Analysis

With Group Income Protection, there’s a particular focus on managing absences before they become claims. As such, early intervention programmes work alongside it to provide tangible benefits. This might include:

Access to telephone / face to face counselling sessions for mental health claims.
Physiotherapy sessions for musculoskeletal claims.
An employee assistance program (EAP).
24/7 Digital GP service (check out our director’s experience using it).
Nutrition and fitness programmes.

The aim is to get workers back on their feet and in work faster than would be the case otherwise, all for free with the policy. This can help reduce financial strain on both staff and the business.

Most importantly, staff can use these benefits before it becomes necessary to make a formal claim, potentially preventing their illness from escalating to the point it needs them to be absent from work.

Benefits For Employees

UK workers are notably under-protected. Just over 1 in 10 UK workers have Income Protection according to our Individual Protection Survey. Moreover, when asked why this was the case, nearly 1 in 5 people surveyed said they’d never heard of it.

Yet it’s a valued benefit, offering income security no matter what the future throws at you. Having an employer introduce and pay for it could therefore be a significant weight off employees’ minds.

Furthermore, Group Income Protection means that staff don’t need to rely solely on minimal SSP should they be off work long-term. This results in better financial outcomes for your employees.

How Much Does Group Income Protection Cost?

There are a range of factors that impact the cost of Group Income Protection. You can adjust some to manage the cost of cover, while others are fixed and can’t be changed.

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. 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 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

Age
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 on-the-job accidents than a desk worker. Industries which pose a higher claims risk have higher premiums.

The Importance of an ‘Own Occupation’ Scheme

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 Premiums

Below is an average cost of Group Income Protection Insurance for two different businesses.

However, these are only designed to give a rough idea of the cost of premiums. For personalised 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	4 Weeks	13 Weeks
Cost per employee	£15.30 per month	£14.02 per month

How Does HMRC Tax It?

HMRC taxes Group Income Protection differently from personal Income Protection.

You pay for personal Income protection from net income, which has already had tax and National Insurance deducted. Insurers therefore pay claims tax-free on personal policies.

However, as Group Income Protection Insurance is paid for by employers, who can usually write off the cost against corporation tax, HMRC taxes it 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 it a P11D Benefit in Kind?

Group Income Protection is not normally considered a P11D / benefit in kind. There’s therefore no additional tax to pay on this cover in most circumstances from an employee’s standpoint.

Who Are the Best UK Insurers?

We are an independent employee benefits adviser with access to all the best UK Group Income Protection providers. No two are the same and some suit particular sectors or businesses better than others.

We work with every single major UK insurer to gather you the best quotes, including:

AIG
Aviva
Canada Life
Legal & General
Unum.

Compare Group Income Protection Quotes & Get Expert Advice

Setting up and maintaining a competitive Employee Benefits package can be a bit of a headache. We do the heavy lifting for businesses of all sizes throughout the UK so they can focus on what they are best at: Delivering their own proposition.

Why Speak to Us?

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 arranging employee benefits. Below are just a few reasons why it makes sense to talk to us.

There is no fee for our service
We are independent and work with all the leading UK insurers.
You’ll speak to a dedicated expert from start to finish
We are very proud of the 2836 and growing independent client reviews rating us at 4.92 / 5
Benefit from the protection of regulated advice
Claims support when you need it most
A personalised benefits page for your business 👌

If you need help setting up a group income protection scheme give us a call on 02084327333 or email help@drewberry.co.uk.

I had a great experience with Drewberry, they have a lot of knowledge and expertise with life insurance and income protection and were able to advise me and arrange suitable products. Highly recommend.

Lachlan Mellings

12/08/2020

Rated 4.92 / 5 by 2836 client reviews

Compare Top 10 UK Business Insurers

Takes approx. 60 seconds

Or call us on 0208 432 7333