Employers should review their group income protection strategies due to increasing staff reliance on company benefits, Mercer is advising.
The HR consultancy has suggested that the Coalition's changes to Employment and Support Allowance (ESA) - which imposes a time limit on those who have limited capacity to work - will lead employees to depend on company-provided GIP schemes for security.
Mercer Marsh Benefits partner John Cowell said this shift would have a marked effect on employers.
"The implication of these changes is that the cost for GIP policies that offset state benefits is likely to increase because ESA will be paid less often and at lower amounts.
"It would be wise for companies to review the current level of benefits they provide to their employees in ill health.
"The employer has a responsibility to ensure that benefit communications and administration remain fit for purpose and no uninsured liabilities are placed on the company as a result of an individual not receiving the level of total replacement income in ill health that they may have been expecting," he added.
The government has imposed a 365 day maximum time limit on the payment of contributory ESA to those who have some limited capacity to work.
The limit will not apply to claimants with the most severe illnesses or disabilities.
Ellipse insurance company communications manager Peter Fenner added that the changes to ESA highlighted the value of reviewing GIP benefits: "Whether firms feel able financially to increase their employees' benefits to compensate for the potentially lower state benefits is another matter.
"It is vital for employers and their advisers to identify any potentially uninsured promises that may have been made on the assumption that the state would be picking up the tab when that is no longer the case."
