When you speak to employers about their employee benefits or reward packages they may talk about their generous pension scheme or their excellent private medical insurance. But mention employee protection and they may struggle to explain what it is, or the benefits of offering it to their staff.
That’s why we’ve answered some of the common employee protection questions that employers are googling.
Why do I need to think about employee protection?
People are living longer, and the working population is getting older with declining health.1 This brings challenges for employers. Absent employees costs UK companies approximately £9bn each year2 with employees taking on average 6.9 days sickness absence per annum.3
This is combined with continuing welfare reform, where more emphasis is being placed on employers to financially support their employees.
Employee protection cover can not only be cost-effective, but can also deliver valued benefits to your employees and their families at a time when they need it most. So perhaps the real question is ‘can you afford not to?’
What is employee protection?
‘Employee protection’, ‘group protection’ or ‘group risk’ – they all mean the same thing and it can form a vital part of your overall benefits package. There are many different employee protection products that can be invaluable in providing financial, practical or emotional support in the event of ill health or death. These include:
- Group life insurance
Historically referred to as ‘death-in-service’, it provides benefits to your employees’ beneficiaries should the worst happen.
- Group income protection
Covers your staff’s income if they are unable to work for extended periods. They often offer early intervention support and rehabilitation to work services to support you and your staff prior to sickness leave.
- Group critical illness cover
Eases the financial burden on your employees and their family if they suffer a critical illness.
Many policies offer additional services that may strengthen your employees’ health and wellbeing offering, such as occupational health services and employee assistance programmes, that can help support your staff, your HR team and the business generally, and secure an earlier return to work.
How is welfare reform going to impact our benefits?
In short, the method by which an employee can access state incapacity support, and the duration over which any such benefit may be payable, is changing, shifting more responsibility on employers to support their employees with benefits such as group income protection. This means that if employee benefit scheme designs remain unaltered, the actual benefit payable to employees during long term absence is likely to reduce.
Each insurer is taking a slightly different stance to how they allow for these changes in state benefits, and part of our role with our clients is to help you understand the options available, and any impact on premiums as a result.
What staff benefits scheme design is most common?
For group income protection schemes, the most common design still tends to give a benefit payable at two-thirds or 75% of salary, less a deduction for state benefits, with a 26 week wait before payments begin. This benefit is typically payable until the age set on the scheme. As peoples’ retirement plans can change, it is important to frequently review the cease age set to ensure it is still fit for purpose. We are working with our clients to challenge this “standard”, looking at options such as limited payment terms, and moving to a flat percentage of salary given welfare reform changes.
For group life insurance the most common level of cover remains at 4x salary, but again we will work with you to understand what would be valued by employees, and what may be needed in terms of benchmarking against your peers.
What is an employee assistance programme?
An employee assistance programme (EAP) is designed to help employees deal with personal and/or work related problems that might impact their work performance, health and wellbeing (emotional or financial). It provides a qualified counselling service to help contain problems and prevent them spiralling out of control. It can include telephone support and in some circumstances face to face support can also be provided. Please note some policies have an EAP embedded as part of the core cover.
Why should we keep paying an income protection policy when we have seen no claims?
We are often posed this question by our clients. Why keep paying for a group income protection scheme, if we have not made a claim for a number of years? The first factor to consider is the size of the insured population. If you have a relatively low headcount, you would not be expecting to see a large claims volume, as typically we expect between 1 and 2 claims per 1,000 lives insured per year.
The other key element here is to understand and communicate the additional support and benefits that can be accessed by working closely with your selected providers. This may include additional benefit offerings such as EAPs, to engaging with insurers on short term absences to gain their support and expertise in preventing longer term issues. The ultimate aim of an income protection scheme for all parties concerned is to have as few absences as possible reach claim stage. Insurers have case studies and examples that we can bring to you, demonstrating the financial and practical impacts. Jelf will help you to structure your benefits programme to ensure you are able to gain access to the support needed.
This article first appeared on jelf.com.
2 Office for National Statistics
3 Metlife UK Employee Benefit Trends Survey 2017
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