It’s no secret that businesses rely on their employees. Providing a range of benefits to protect your employees and their families against the worst happening, shows your employees they’re valued.
There are many benefits that can be bought by employers to cover their employees, the main ones being: Group Life Insurance (sometimes referred to as Death in Service), Group Income Protection (or Sick Pay), Group Critical Illness, Business Health Insurance and Business Health Cash Plans.
A good benefits package can help recruit, retain and engage talent, and can support the values and culture of an organisation. They also allow employers to reinforce their position as a caring employer, throwing a financial lifeline to their people when they need it most.
Employers may promise certain benefits to employees as part of the contract of employment. Rather than bear all of this risk themselves, many employers choose to take out insurance policies to cover some or all of their liability. This enables employers to shift the risk from themselves to insurers and also move some of the difficult decisions and processes to the experts.
Provided in isolation or as part of a wider benefits package, these benefits can give employees access to insured financial protection cover they might not be able to either afford or access for themselves.
Most benefits are a high value, low cost option for employers looking to offer something more to their staff.
Employee Benefit solutions are most usually commercial contracts which support employers in meeting their contractual promises and legal obligations to their employees.
The employer is generally the policyholder, pays the premiums and claims are made by the employer in respect of their employees. Generally any claim is paid to the employer (or often the trustees of the pension scheme in the case of group life assurance), although not always as some are either paid directly to the client, or their beneficiaries, or a claimable expense in the case of Business Health Cash Plans.
So, why use an adviser? – firstly, because this is an intermediated market i.e. you cannot go direct to the insurer. Secondly, and as importantly, there are mistakes to be made, and these are not small amounts of money. Tax and legislation can be tricky and you need an adviser or benefits consultant who has knowledge and competence in this area.
A good adviser should help you to understand what it is you’re buying, what extra support services are available, how to signpost people to that support, and who does what and when, rather than just focussing on price. A good adviser will help you through the process and help you design the benefit structure with your objectives, philosophy and budget in mind, and help you select the provider best suited to your needs.
And why use Finance North – Mark Roberts has over 33 years’ experience in financial services with the last 14 of those years working exclusively in the insurance space. He is specifically qualified to deal with group risk benefits and is closely aligned to the work of GRiD, the industry body for group risk and its development within the industry.
Mark prides himself in the relationships he builds with his clients. He believes that his attention to detail, the knowledge and experience he has, and the excellent team he has around him means he is perfectly placed to advise and look after business of all different sizes, and sectors.
Expert advice should always be taken when setting up or reviewing a group risk insurance scheme to ensure that optimum cover is provided, any extra support services offered alongside the policy are used and all tax efficiencies are maximised.
Group life assurance is the most common employer sponsored protection benefit in the UK and often represents the sole life insurance provision for low to middle income individuals.
Group life assurance provides a benefit should an employee die in service. This can be a lump sum payable to nominated beneficiaries or a taxable pension payable to the employee’s spouse, civil partner and/or other financial dependants, or both. A group life assurance policy can be put in place by the trustees of a pension scheme to cover the scheme’s liabilities for death in service benefits or by an employer to cover a contractual promise outside of a pension scheme to pay a benefit on an employee’s death in service.
Most group life assurance policies operate within HM Revenue & Customs’ regulatory framework for a ‘registered occupational pension scheme’ (which includes arrangements set up to provide benefits on death in service only). Generally, premiums paid by an employer can be offset against corporation tax and are not regarded as a benefit in kind. Lump sum death in service benefits can normally be paid tax free up to the Lifetime Allowance. It’s possible to provide death in service benefits in excess of the Lifetime Allowance but expert advice is required.
Group income protection, or permanent health insurance, is a policy taken out by an employer to cover a promise to provide sick pay to employees if illness or injury prevents them from working for a prolonged period. It can also replace lost income where an employee has to take a part-time or lower-paid position because of illness or injury.
The focus for a group income protection claim is whether or not the employee meets the definition of incapacity under the policy (in many cases, this is based on ability to do their own job). Group income protection providers support employees to help them return to work with reasonable adjustments made by their employer, often before they reach the point of making a claim. For more on reasonable adjustments, see our factsheet on disability and employment.
However, if the employee cannot work due to illness or injury the policy will pay a benefit of a proportion of their salary. The benefit is paid to the employer and then passed on to the employee through the PAYE system. The benefit level is designed to ensure that the employee will be able to maintain a reasonable standard of living but still has a financial incentive to return to work.
Insurers will also work with the employee and their employer to get them back to work as soon as it is appropriate. Insurers provide access to support services which may not otherwise be available to the employer and employee, for example access to physiotherapy or counselling sessions.
The employer usually gets corporation tax relief on premiums and benefits are normally paid to the employee via the employer’s standard payroll system on a monthly basis. The employee pays income tax and National Insurance contributions in the normal way. Generally, premiums are not treated as a P11D benefit for employees.
Group critical illness is a policy taken out by an employer to provide a tax-free lump sum to an employee on the diagnosis of one of a defined list of serious medical conditions or on undergoing one of a defined list of surgical procedures. The employer chooses between a level of core cover (which insures against some of the most serious critical illnesses) or core plus additional cover (which insures against a number of additional serious conditions too).
A claim will be considered once the employee has survived for a specified period and been diagnosed with or suffered one of the conditions covered by the policy. Most insurers will also offer cover for Permanent and Total Disability (for employees assessed as being permanently and totally disabled but not otherwise able to claim for one of the conditions covered by the policy).
Where cover is paid for by the employer, corporation tax relief is given on the premiums, the employer is liable for Class 1A National Insurance contributions on the premiums and premiums are treated as a P11D benefit for employees.
Group critical illness may be provided on a purely voluntary basis and/or as part of a flexible benefits arrangement. In this case, the premium the employee pays does not qualify for tax relief.
As the cover is often ‘voluntary’ or selected by the employee and, for most people no medical underwriting takes place, cover generally operates with a pre-existing condition exclusion. This means that someone with an existing medical condition will not be able to claim for this or a similar condition.
Whilst there is no denying the value of our NHS, its over-use means that treatments can take time to organise and complete. This can put a huge financial strain on people who are off work until they have their required treatment.
You can help reduce the amount of work missed by adding preventative measures to support your employees during absences. Business Health Insurance is one type of support you can offer – by shortening the time they have to wait for medical care.
Company Medical Insurance plans are available for the treatment of acute conditions, which are conditions that are curable and respond well to treatment.
One of the biggest reasons why businesses choose business health insurance is to ensure that their staff get the best treatment as quickly as possible, particularly in the wake of Brexit and Coronavirus, where waiting times have increased to record levels. However, it isn’t only your employees who can benefit from better and quicker healthcare. If the time that they are in pain or discomfort is reduced, then they will be back to work as soon as they can.
There are numerous features provided by different insurers, including;
Mental health support
and also additional benefits including;
Employee Assistance Programmes
Second Medical Opinion
Fast track appointments
Discounted gym membership
Under current tax rules from HMRC (January 2022), Business Health Insurance is usually an allowable business expense. When it comes to doing your books at the end of the year, your company should receive tax relief on the premiums.
Many brokers overlook the tax implications for employees, but insurance paid by the employer is considered a P11d taxable benefit by HRMC.
Employers will have to declare to HMRC any benefits which have been given to employees and complete a P11d form. Employees should always be made aware that they are liable for the tax on this benefit.
Business Health Cash Plans are a type of insurance through which businesses can support the routine health needs of their employees. They give money back for everyday healthcare costs such as visits to dentists, opticians, physiotherapists, and even health checks. They can be made available as a employer or employee paid health benefit.
It differs from Business Health Insurance (and Private Health Insurance generally) which can cover operations, hospital stays and serious health problems, such as heart attacks and cancers. A health cash plan only covers everyday health needs, not urgent care.
One of the major benefits of a health cash plan is that it will often cover pre-existing conditions too (though again, you’ll need to check the policy). As such you can usually avoid full medical background checks as required in other health insurance policies. This means all your staff are treated equally under the policy regardless of their medical history.
The type of healthcare you can access in a health cash plan may include:
This is not an exhaustive list and an insurer may choose to include other routine health checks and treatments. Often insurance providers will add health and wellbeing apps or online portals to provide further advice and assistance to those covered by the policy.
A business health cash plan provides the following advantages:
You can avoid the usual medical background checks and provide some form of coverage to the whole team without having to discriminate against those with a more complicated medical history.
It’s easier to implement than a business health insurance plan – which will require background checks and a more complicated set of terms and conditions.
Often it’s the routine health issues that people need help with. Everyone benefits from regular dental appointments and eye checks.
Routine health check-ups can help avoid more serious conditions developing in the future.
You can tailor it to the needs of your business and employees – ensuring it’s going to offer genuine use.
It’s an effective way of looking after you employees wellbeing and showing you care.
Risk management Group risk policies are used to manage people risk. Costs are known and can be budgeted for accordingly whereas employers self-insuring these risks may be exposed to potential peaks in claims from time to time. Group income protection is used by employers as an integral part of their absence management or attendance programme, together with additional support services (which are often provided by group risk providers for free or at a heavily discounted price).
Added value services Under a group risk policy both employees and employers get access to a wide range of extra support that can be used on a daily basis, even if a claim is never made. Such support services can include absence management, employee assistance programmes, GP helplines, online health assessments, second medical opinion services, fast-track access to counselling, physiotherapy, other occupational health services and more.
Flexible approach for employees over age 65 Employers are not legally obliged to extend provision of insured protection products (such as group life assurance) beyond age 65 (currently) or the State Pension Age (as this increases to 66, 67, 68 and beyond). This exemption applies to insured benefits only and does not apply to self-insured arrangements. Employers who do choose to continue insured group risk protection benefits to their staff beyond age 65 (currently) or the State Pension Age (as this increases) will find that group risk providers can be flexible in accommodating a range of upper ages or other solutions, such as a limited payment period under a group income protection policy. It is best to think ahead on this issue as it’s always easier to negotiate terms in advance rather that at the point when the first employee reaches age 65.
Group risk policies can dovetail with other provision
It is beneficial to consider how group risk protection benefits sit within the overall benefits package. For example:
In particular, understanding what comes along with a group risk policy (for example, employee assistance programmes, vocational rehabilitation, fast-track access to counselling, etc), and when and how to use it, is vital and merits equal consideration along with price and core protection.
There are over 23,000 IFA’s in the UK. There are however only a handful of advisers or consultant firms who are members of GRiD – the Group Risk industry body. Finance North was proud to be a member of GRiD in 2017/2018, and continue to offer business and corporate clients the very highest levels of advice and service in this highly skilled and niche market.
We also guarantee that we will never charge you a fee for our advice or service, and will at all times show you the utmost respect, providing you with a transparent and professional service. We are happy to put all our recommendations in writing, because we stand behind our advice 100%.
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