A group income protection scheme can help both employers and employees in the event of a member of staff’s long term sickness. An employee’s long term absence will often not only impair a business’s productivity but it could also translate in a “bottom line” reduction in profits or, worse, an increased loss.
A group income protection scheme can help guard against this by providing the employer the financial resource to guarantee an income to employees who are unable to work as a result of either illness or injury. It can help demonstrate a positive approach to staff welfare by providing financial support through what can be both a financially and emotionally stressful time.
A group income protection plan can also be extended to cover employer and employee pension contributions as well as National Insurance contributions thus providing a truly holistic benefit in that a member of staff’s retirement plans can also be maintained.
Many schemes now also incorporate an Employee Assistance Programme thereby ensuring that both the employer and its employees have access to an ever increasing range of injury, sickness and even financial counselling and support.
Product Features
This type of scheme can be very flexible and structured to suit an employer’s precise requirements. Any income benefit is usually paid as a percentage of an employee’s gross pay after the deduction of an adjustment for the level of Employee Assistance and Support (EAS) (previously known as State Incapacity Benefit) any benefit would be paid to the employer who would then deduct tax and National Insurance payments before passing it on to the employee. If it has been decided to insure against pension contributions and National Insurance contributions then the additional payment in respect of these would also be passed on in the normal way.
It is also possible to protect benefits against inflation by including an escalation option. This can ensure that any benefit increases over a period of time either in line with a fixed percentage amount or perhaps the Retail Prices Index which would usually be subject to an absolute maximum.
The scheme can also incorporate free cover limits thereby often reducing the necessity for medical evidence of health to be provided up to certain levels.
Benefits for Employers
- A scheme can provide excellent financial assistance at an important time and often at a modest percentage of the payroll.
- Contributions are normally allowable as a business expense for the employer thereby reducing the net cost.
- Cover is also available for pension contributions as well as the employer’s National Insurance contributions.
- A well structured scheme enhances the employer’s image in the eyes of the staff.
- The availability of counselling and support services that an employer might otherwise consider paying for.
- Additional experts report in managing any rehabilitation to the workplace
Benefits for Employees
- Any premiums paid on an employee’s behalf are not normally treated as a benefit in kind.
- Financial assistance at a vulnerable time.
- Access to a wide range of support services for an employee and their family.
- The possibility of maintaining retirement plans even through periods of long term incapacity.
The above information regarding taxation is based upon our understanding of current legislation which, of course, is liable to change in the future and would depend upon an individual’s financial circumstances.
If you would like further information on group income protection schemes then please email Nicola Hemmings or call her on 0845 3081482.