To help attract and retain the very best employees, many employers have introduced Group Income Protection to their range of employee benefits. It’s a valuable benefit that can protect an employee’s income if they’re unable to work, and it could give you the edge over other employers competing for the same talent.

It gives employees that extra layer of security, knowing that if they are unable to work, they can still pay their bills

What is Group Income Protection?

Having a Group Income Protection policy in place means that if an employee cannot work due to a long-term illness or injury, they’ll continue to receive an income. It offers them that extra layer of financial security, knowing that even if they are unable to work, they can still pay their bills and support their family.

Group Income Protection policies can also include extras like rehabilitation and wellbeing services. These often include counselling and training, to help prevent future health issues from occurring, while rehabilitation therapies can help affected employees return to the workplace faster.

Many policies also compensate the employer for the costs of finding replacement staff and temporary cover.

What are the benefits?

For employees, the benefits of Group Income Protection are obvious. They will continue to receive an income during a long-term illness or injury, and will often benefit from rehabilitation services that speed up recovery and return to work. If the policy includes ongoing wellness counselling, support and training, employees will benefit from programmes designed to prevent illness and injuries from happening in the first place.

There are many benefits for the employer too. A competitive benefits package that includes Group Income Protection will help you attract candidates and retain existing talent. The services offered by many policies provide early intervention and prevention techniques, which can help reduce long-term absences – and their cost on the business. In addition, businesses will usually receive tax relief on premiums.

The fees must be carefully weighed against the potential benefits, to ensure it makes sense for your business

What are the disadvantages?

Group Income Protection is an added cost to an employer. The fees must be carefully weighed against the potential benefits, to ensure it makes sense for your business as well as your employees. You must keep up with monthly payments – otherwise cover will lapse – and ensure any claims are made in accordance with the policy’s criteria.

From the employees’ perspective, there are few (if any) disadvantages. However, it’s important to know that because it’s a group policy, there’s little opportunity to individualise it. And, as with most other employee benefits, if they leave the company, the cover will end.

How does Group Income Protection work?

A policy is taken out in the employers’ name. The cost of the monthly premium will depend on the number of employees within the business, the level of cover and any additional features included. As the policyholder, it’s up to the employer to make a claim and then pass the payment on to the employee via the company’s PAYE payroll system.

There will be a period of time before a policy begins to pay out. This is called the deferred period and can be anywhere from one week to 12 months. The policyholder usually chooses the length of the deferred period to align with the company’s policy on sick pay. The longer the deferred period, the lower the monthly premiums.

What does Group Income Protection cover?

Most Group Income Protection policies will pay out to an employer as follows:

  • A percentage of the employee’s salary either until they return to work, for a set amount of time (for example, five years), or until the employee reaches a certain age such (such as retirement)
  • The employer’s National Insurance contribution for the employee
  • Any contracted pension contributions for that employee
  • A lump sum if the employee needs to take early retirement due to ill health
  • An upfront lump sum if the employee has a critical illness, such as a heart attack or stroke, and cannot work for at least two weeks
  • The employer’s costs for temporary or replacement staff

Some policies have additional offerings, such as:

  • Rehabilitation services, like occupational therapy and physiotherapy
  • Wellness training, such as stress management or work-life balance
  • Counselling support

What should you consider when choosing a Group Protection Policy?

Which employees are you covering?
Some companies offer Group Income Protection to their senior managers, whereas others offer it to all employees. The more employees you cover, the more it’s likely to cost.

What level of cover do you want to offer?
You can offer the same amount of cover for everyone, or you can tailor the cover to differ depending on the employee’s level of seniority, or their age.

What benefit do you want to provide?
You need to decide what percentage of the employee’s salary you want to provide cover for, and the level of any fixed lump sums. You’ll also need to consider additional benefits such as rehabilitation, counselling and training.

How much does it cost?
Many factors will affect the cost of the monthly premiums. The most obvious one is the number of employees you want the policy to cover, but it will also be influenced by:

  • Payroll value
  • Employee age
  • Occupation
  • Location
  • Deferred period
  • Cover period
  • Additional benefits

Amber River financial planning for businesses

There are many ways to tailor a Group Income Protection policy across your entire business. It’s important to implement the right benefits that suit your company, your employees and your budget – but this can be a complex calculation to get right. That’s why it’s worth seeking the advice of an independent financial planner to help you find the right policy and appropriate level of cover.

Amber River has a network of Chartered financial planners, right across the UK. If you want to set up an initial appointment, call 0800 915 0000, or alternatively use our contact form here.