The key benefits of group income protection
Emma Page 20 April 2012 18:34
The total cost of covering an absence can amount to as much as £760 per employee per year, according to the CBI.
Over 95% of employee absence is short-term and yet long-term absence (LTA) accounts for 33% of days lost in the UK. Long term sickness impacts the organisation in many ways, from increased colleagues' workloads to paying for temporary staff cover.
LTA can cost an organisation as much as 16% of payroll each year whereas the cost of group income protection (GIP) can be as little as 1% of payroll, according to the CBI.
Tim Powell, national accounts manager for Unum, says: “Generally employers don't have a grasp of what their absence costs are. Obviously there are the direct costs such as salary but what about the additional workload, high price of temps, possible recruitment costs, lower productivity, low morale surrounding the absent individual?”
The added-value benefits of GIP stretch beyond providing income towards the cost of an employee's sickness absence because providers can help rehabilitate employees into the workplace quickly. Many also offer preventive occupational health programmes that aid early intervention – nipping potential issues in the bud before the employee goes off work.
Howard Rayner, group legislation manager at Canada Life, says: “The market for GIP is under-penetrated. People do not realise that group risk products can be much cheaper per person than the cost an individual would have to pay for the cover. And most people get cover without the need to be medically underwritten. Group IP also substantially helps employers to manage sickness absence and meet their responsibilities under legislation such as the Equality Act 2010. With the changes planned by the Government with the Welfare Bill, state benefits are likely to be lower and more difficult to qualify for. GIP can really help here.”
Proving ROI should not be difficult. Glen Laming, sales director for GIP at Legal and General ,says: “Proof of ROI comes by demonstrating a reduction in long-term absence. With someone on £50,000 off on 80% of salary - if we can get them back to work quickly that's quite a saving.”
Here are some of the key benefits of a GIP policy:
The obvious benefit to an employer of offering a group health scheme to employees is that it can reduce the amount of time employees are absent due to ill health. This is because it is possible to be diagnosed and treated via a GIP provider's rehabilitation provision. Not only do employees feel valued by you as an employer who looks after their wellbeing, but they are diagnosed, treated and back at work quickly.
“GIP product schemes are all fairly similar in terms of percentage of salary, referred periods, length of cover and so on. The definitions are similar. The differences lie in the detail. With Unum it's in the technical expertise we have in linking absences, and the quality of our rehab value-add,” says Powell. “Rehabilitation definitely gets people back to work quicker but this has to be in a safe and sustainable way because if they're not ready they'll be off again.”
Unum's vocational rehabilitation consultants (VRCs) support more than 1,000 people per year. They are experienced in dealing with different types and sizes of employers, and employee conditions ranging from cancer and musculoskeletal disorders to stress (the three largest causes of long-term sickness absence).
Cases of long-term sickness absence are few and far between, and dealing with them can be stressful for HR staff and line managers. Most GIP providers offer absence management services to remove the burden of managing this so HR can concentrate on rehabilitation or more strategic issues. This can have a beneficial effect on GIP premiums and your GIP provider will be able to draw on wide industry knowledge and experience of managing periods of absence.
Unum, as one of the UK’s largest GIP providers, has a huge absence database and will get together with clients on a quarterly basis and look at trends between sectors. “We can really give clients a detailed picture of absence, across their business and throughout their sector as a whole,' explains Powell.
“There are so many differences in the incidence of stress, for example between retail banks and investment banks, and we will be able to demonstrate this. Absence management also enables employers to keep a scheme in line with any restructuring. We will see a spike in a client's claim experience if they restructure and people are worried about job security.
“What absence policy do you have in place and do you stick to it? A large percentage of employers have an absence policy in place that they don't follow. There are two elements - how do you fund sick pay and who do you pay it to? With a small employer there would doubtless be an open-ended liability.”
Steve Bridger, head of group risk at Aviva, says: “There's a low claims incidence when it comes to income protection, perhaps one claim per 300 to 500 lives. Most of us have never known anyone who has had to take more than six months off work. But dealing with it will not be part of an HR manager's daily role. Our guys are trained counsellors. They understand the product, the state benefit system; they'll also have an understanding of your company culture, medical underwriting and sickness.”
Insurer Ellipse claims to manage absence from day one. “The employee will phone us first, then we contact their line manager. It means we can start to intervene early. The employer's HR department will be able to log in to a secure area and retrieve all sorts of data about the absence so they can see if there are any trends in absence in a particular area of the business.”
Tax relief on contributions
Benefits are paid to the employer who passes them to employees through their payroll system so national insurance and income tax will be deducted. GIP is not treated as a benefit in kind and an employer can get corporation tax relief on premiums.
Talent attraction and retention
How an organisation is perceived to treat its employees when they become ill can have a significant impact on its employer brand, according to research by Ellipse and Cary Cooper, professor of organisational psychology and health at Lancaster University. Ellipse's research found that nearly three-quarters (72%) of workers say the way a company treats sick employees impacts on how they feel about the organisation. This is most prevalent among 18-to 24-year-olds, with 84% citing it as important, compared with 63% of those aged over 55. Just 15% feel this has no impact at all. In addition, 80% of line managers agree that an organisation’s approach to absence management affects its ability to attract and retain employees.
Employee assistance programmes
Most GIP providers also offer employee assistance programmes (EAPs), which provide preventive services ranging from health assessment tools to more proactive face-to-face counselling sessions. Other added-value services that may be offered include confidential nurse helplines, offering advice 24/7 on health-related issues.
Traditionally, employers have provided EAP services to employees via a standalone product with annual costs of between £5 and £25 per employee. But with a GIP arrangement, the EAP tends to be an inclusive benefit. In a recent survey of more than 4,200 employees who had received counselling, FirstAssist (one of the UK’s leading providers of EAPs) found that 52% of employees stated that without assistance from their EAP, their issues would have resulted in them missing work.
Canada Life offers a crisis helpline to all of its clients' staff, even if they aren't covered under its GIP scheme. “There's a risk that employers put too much stress on people, especially if there are redundancies on the horizon,” explains Rayner. “Our Employee Care Assistance Programme is available for all employees even if you don't insure your whole workforce. It is a 24-hour confidential telephone counselling service and up to four face-to-face sessions a year.”
At a time when employers must be compliant with a growing raft of legislation, GIP can help organisations to reduce the risk of employment tribunals.
With unlimited settlement possibilities, managing an employee’s illness in the wrong way could have detrimental effects on an employer’s liability insurance.
Providers have the expertise to ensure that you uphold your duty of care. All insurers provide assistance on how an employer can help meet their responsibilities under disability discrimination legislation, for example. This may involve an employer making changes to the workplace, to meet the needs of an incapacitated person returning to work.
“We'll see more and more cases of individuals taking employers to court because they have not made reasonable adjustments to the workplace to enable them to continue work after an illness or injury,” says Rayner. “For example, if someone can work only 80% of the working week you have to accommodate that. You can't cut someone adrift because they're less than 100% effective.”
In a competitive market, insurers have increased the flexibility of their contracts, with most offering shorter payment periods and lump-sum payments to enable cover to be provided at an affordable price.
GIP can be used with other employee benefits, such as private medical insurance, to allow employers to take care of their staff more comprehensively and create a wellness package.
“You could give staff the responsibility to decide their own level of cover, by offering it as a flexible or voluntary benefit. Staff will pay a monthly premium through a salary-sacrifice arrangement and save tax and national insurance,” adds Bridger.