Income Protection Insurance

Long-term sickness absence (defined as any period longer than six months) costs public and private sector businesses £6.5bn a year. In relative terms, this could amount to 16% of your payroll, which is why it’s essential to have active resources in place to minimise the financial impact of employee absence.

The Issue

The challenges to businesses can have far-reaching consequences:

  • Statutory Sick Pay must be paid for up to 28 weeks, but many employers feel obliged to extend this timeframe which places a great strain on resources.
  • Other employees will have to cover the absent role resulting in productivity and morale issues as well as potential additional overtime payments.
  • New or temporary staff will need training and time to understand your corporate ethos and working culture.

The Solution

Income Protection Insurance helps employers to safeguard the wellbeing of their employees by providing a replacement income stream during long-term absence. This solution will help you to solidify employer/employee relationships by offering key benefits, as well as manage the cost of absence more efficiently.

Income Protection Insurance Essentials

Income is maintained until the employee either comes back to work or retires, whichever happens first.

  • Benefits will usually coincide with the end of your company’s sick pay policy. For example, if your policy is to offer full pay for the first six weeks, then half-pay for the next six weeks, the Income Protection payments would kick-in after 12 weeks (known as the ‘deferred’ period.)
  • Benefits are paid to the company and forwarded on to the employee through the usual PAYE system minus tax and NI.
    – There is no tax liability to the employee on premiums and it’s not classified as a P11D benefit.
  • The maximum level of income that can be secured through Income Protection is 80% of pre-incapacity salary.
    – We wouldn’t recommend a level higher than this since there needs to be an incentive for the employee to come back to work as soon as possible.
  • Some policies offer built-in indexation, meaning the income would keep pace with inflation. However, the greater the benefit and the shorter the deferred period, the company incurs greater costs.

Our specialist team will guide you through the range of Income Protection Insurance policies available on the market and identify the best solution to meet your needs.