Your IndustryFeb 5 2015

Need for group income protection

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Absent employees can be a drain on a business; not just in terms of cost, but also in terms of productivity and levels of morale, says Steve Bridger, head of group risk at Aviva UK Health.

By introducing a group income protection policy to your corporate clients, Mr Bridger says you are helping to improve productivity and morale, while providing access to initiatives that could help reduce ill health in the workplace, and cut both costs and administration for the business.

One in 10 people in the UK will be unable to work for more than six months as a result of illness or injury at some point during their working lives, according to John Letizia, head of public affairs at Unum.

For employees, Mr Letizia says income protection offers a financial back-up plan and provides invaluable peace of mind.

For employers, Mr Letizia says income protection can mitigate the financial risks of long-term absence, which currently cost businesses more than £3.1bn a year.

In fact, he says it is one of the few benefits to provide a payback for businesses if they need to claim - through not having to pay occupational sick pay and through indirect cost savings associated with replacing staff, recruitment and absence management.

What is more, Mr Letizia says smart companies should consider offering group income protection as part of a comprehensive wellbeing strategy because it is a tangible way to show staff they care.

Mr Letizia says: “When employees feel well cared for, they are more engaged, more productive and more likely to stay with the organisation.

“The cost of replacing an employee with a salary of more than £25,000 is £30,614, so offering a benefit which is known to improve staff retention makes sound business sense.”

Nick Homer, group protection manager of Zurich UK Life, says the group income protection claims management approach provides early intervention and specialist rehabilitation support, helping employers to:

1) Effectively deal with workplace absence, particularly mental illness and musculo-skeletal conditions (An aging workforce is likely to bring new challenges for employers).

2) Retain experienced staff within the business by optimising their opportunity to return to work, minimising the disruption to the business.

3) Meet their ‘duty of care’ obligations and the requirements of the Equality Act, helping to ensure consistency in the management of long-term absent employees.

In addition, Mr Homer says group income protection provides the employer with the option to cover associated expenses such as pension scheme contributions and employer’s National Insurance contributions.

Typically, he says the maximum benefit available is 80 per cent of gross salary (maximum benefit £350,000 a year), payable up to the age of 70.

Benefit payments can start after eight weeks of incapacity, although Mr Homer says a deferred period of 13, 26 or 52 weeks is more common for group income protection.

According to Vanessa Sallows, benefits and governance director for corporate business at Legal & General, the only perceived ‘downside’ of group income protection is the cost.

However Ms Sallows says group income protection can usually be obtained for around 1 per cent of payroll depending on the level of benefits chosen and the premiums are classed as a business expense to reduce corporation tax.