My client Alan owns a building company that employs 47 people. He already has death in service insurance for his employees, and I'm trying to convince him of the need for an employee income protection (IP) policy. What are the arguments to extend this to all staff, not just management?
Laurence Power, Bluefin Group
As with many building companies there is a high incidence of self employed workers, and extending cover to the ‘shop floor' provides a number of advantages. One attractive argument is that Alan would become an employer of choice for prospective staff through providing a Group Income Protection (GIP) policy. Not only is this support attractive to employees, but offering benefits is cheaper than providing salary with the National Insurance and tax implications.
While manual workers do have a higher incidence of claims, due to the salary levels these will usually be low, and thus cheaper. These injuries are also mainly muscular skeletal, which readily heal, normally before the expiry of the deferred period. As such, this would not result in a claim, but if there was a serious injury or illness, he can be reassured that full payment would be made.
Increasing the membership will provide additional benefits to Alan. It would mean moving from single premium costing to a unit rate which is normally cheaper per £1 of benefit. This change to a unit rating will also result in a more simplified administration process for the policy, and thus staff can be covered immediately rather than having to apply each time.
An increased number would present a higher free cover limit, meaning that senior management can, more than likely, be covered without underwriting. This reduces the possibility of loadings and/or being declined.
Wojciech Dochan, Unum
The pressures on a business not only come from the ability of employees to change employers with greater ease than ever before but also from the loss of an employee due to sickness. A small handful of long term absences can seriously increase the overall annual cost to a business especially a building business by disrupting the ability to meet contracts on time and by incurring extra costs for overtime or contract work.
Successful employers rely on the knowledge, skills and intellectual capital of their workforce to generate value. That is why businesses need to provide employees with flexible working practices and protection benefits, while at the same time balancing the need to make every penny count to stay ahead of the competition.
Purchasing a Group Income Protection policy means that when an employee goes off on long term sick because of an accident or illness, the insurance company will pay a proportion of the individual's salary to the employer in order to reimburse the cost of continuing the employee's income.
Companies like Unum not only cover this, but also provide access to rehabilitation support to aid an early return to work and offer additional free services such as access to Employer HR and Legal advice on such matters as employment law, commercial law and health & safety issues. For managers and staff, Unum also offers a free Employee Assistance Programme.
Marian Ware, Canada Life Group Insurance
At a time when many businesses are looking to ensure they both attract and, more importantly, retain their staff the argument to extend employee benefits to the whole workforce is very convincing. GIP allows employers to cover their workforce for roughly 1-1.5% of payroll, which means that employees are receiving a much sought after benefit without your client having to pay through the nose.
In this particular case, your client would benefit from a higher Free Cover Limit (FCL) by including more employees. A FCL is the value to which your client is able to insure their employees, without needing to undertake any medical underwriting on those being insured. Only individuals with benefits over and above the FCL will need to be insured. Therefore, covering a higher number of employees on the scheme will provide your client with a much higher FCL, which makes the policy much quicker and easier to implement.
In addition, many GIP policies also offer complimentary services which help to monitor work place absence. The provision of guidance and counselling services to employees can help prevent long term absence from starting, while support is also available for employers who are assisting staff returning to work from long term absence.
These extra services alone can help save employers thousands of pounds in the event that one of their employees is signed off from work on long term sick leave - providing a strong argument for extending the benefit to the whole workforce.
