Employee Sickness Insurance can protect businesses and their staff in the event of unexpected sick leave. In the UK, employers pay an average of 4.6 days’ sick pay for every employee, every year. While this often can’t be helped, it can come at a high price.
With this in mind, it’s no surprise that more and more employers are opting to put Employee Sickness Insurance in place. But what exactly is it?
What Is Employee Sickness Insurance?
Employee Sickness Insurance is also known as Group Income Protection. It’s a type of protection policy where employers pay a monthly premium to cover staff sick leave.
If a staff member who is covered by the insurance is unable to work due to illness or injury, the company can claim on the policy. The policy will then pay out a percentage of the employee’s monthly income, rather than the employer having to fund it.
Why Is Employee Sickness Insurance Important?
Employee sickness can have a significant impact on a business, so it’s important that employers plan for it. Especially as absence rates are increasing.
In 2021, employee sickness rose to a high of 2.2% from 1.8% in 2020. This is the highest rate since 2010 and equates to 149 million lost working days. Lost days as a result of employee absence can take its toll on any business and prove to be very expensive.
Employee Sickness Insurance can provide a level of financial security for your business and your employees. Many policies also offer services to help prevent sickness and absence in the first place. Offering such a benefit can also make employees feel valued, which can boost morale and engagement levels.
5 Minute Video Guide To UK Employee Sickness Insurance
Not got enough time to read our guide fully, but want a quick expert overview of Employee Sickness Insurance? Our very own Nick Nelms, gives us the rundown on what you need to consider before taking out a policy for your staff. Just hit play! 👇
How Does Employee Sickness Insurance Work?
Employee Sickness Insurance kicks in if a member of staff is unable to work due to illness or injury. Rather than receiving Employer Sickness Pay or Statutory Sick Pay, the insurance claim pays out a regular income each month for the employee who is off work.
When a claim is made, the insurer pays the monthly benefit to the business. You as the employer then pay this to the individual through PAYE, similar to their monthly salary payments.
Who Owns The Policy?
As the employer, you own and pay for the scheme as a benefit for your staff. Some companies offer Income Protection cover as a free benefit. Others might require staff to contribute towards the cost.
What Does Employee Sickness Insurance Cover?
The type of cover provided by Employee Sick Pay Insurance policies will vary depending on the needs of the business. There is no one-size-fits-all approach to this type of income protection; budgets and needs will often be different.
But in most cases, if an employee is unable to work due to accident or sickness, Employee Sick Pay Insurance can cover up to 80% of their salary. This will be paid until they are fit to return to work, reach a certain age, or after a certain period, e.g. 2 years.
Group Income Protection policies can also cover:
- An employer’s National Insurance Contributions on members’ wages
- Short-term costs, such as wages for temporary staff
- Pension contributions
- Upfront payments if an employee suffers from a condition with long-term health implications. For most insurers, this includes heart attacks, strokes, and cancer diagnoses. This will pay out if the member is unable to work for at least 14 days
- A tax-free lump sum payment if a member retires early due to poor health.
Many of these features are flexible and can be adjusted to suit your budget and circumstances.
Statutory Sick Pay Vs Employee Sickness Insurance
Unlike Employee Sickness Insurance, Statutory Sick Pay (SSP) is a legal requirement. It is the minimum amount that an employer must pay to eligible employees who are unable to work due to sickness.
If an eligible employee has been off sick for more than three days, but fewer than 28 weeks, you as an employer must pay SSP. Currently, this is set at £116.75 per week in the UK.
Employee Sick Pay Vs Employee Sickness Insurance
Employee Sick Pay is where an employer chooses to offer more contractual sick pay to employees than what they would receive under Statutory Sick Pay (SSP). The amount of sick pay must be equal to, or more than SSP. Beyond that, it’s up to you how much sick leave you provide for your staff.
While paying Statutory Sick Pay to your employees is mandatory, offering ‘Employer Sick Pay’ isn’t. Like Employee Sickness Insurance, this is entirely optional. However, it can be a valuable employee benefit that provides a higher level of sick pay for your workers.
Both Statutory Sick Pay and Employee Sick pay are paid for by you as the employer. Without protection such as Employee Sickness Insurance, absences can have a big impact on a company’s budget.
Benefits Of Employee Sickness Insurance
When it comes to Employee Sickness Insurance, there are a range of benefits on offer for employers and employees. We dive into what these are these below.
Benefits For Employer
Although offering Employee Sickness Insurance comes at a cost for employers, it can prove to be a very worthwhile investment. The benefits it can offer include:
Financial Security
Employee Sickness Insurance can provide you as an employer with a level of financial security. As mentioned above, it’s very difficult to plan and budget for absences. This is because you can’t predict the future.
However, by having protection in place, you can safeguard your business against any unknown costs due to sickness. This can help when it comes to financial planning.
As an employer, you can budget for the cost of the premiums, but if someone is off for long periods of time then the policy can take care of the rest.
Attracting & Retaining The Best Staff
Not only can Employee Sickness Insurance provide you with financial security, it can also help you to attract and retain the best talent.
Employees look for more than just a good salary now, they want to feel valued and cared for. Benefits such as sickness insurance, which can provide financial security, can help you as an employer to do this.
Providing Tax Relief
As a benefit, it also qualifies as an allowable business expense. This means companies can claim tax relief on their premiums, making it a cost effective benefit.
Reducing Absences
A lot of Employee Sickness Insurance providers now offer a range of free additional benefits to support and prevent ill health. These include services such as Virtual GP services, Second Medical Opinion and Counselling.
Benefits For Employees
Similarly to employers, there are many benefits of company paid Sick Pay Insurance for the employees who receive it.
Peace of Mind
43% of employees say they are stressed as a result of money worries. This is no surprise when 1 in 5 said that they couldn’t survive on their savings for more than a week if unable to work.
By providing Employee Sickness Insurance you can help to alleviate this stress. Knowing that they have financial security if unable to work due to accident or sickness, can provide employees with peace of mind. This in itself can help to prevent stress related absences.
Quicker Recovery
Many providers now include rehabilitation services as part of their cover. This means your staff can take advantage of services that help them recover faster and return to work sooner.
Not only this, they offer some great free additional benefits. Services such as Virtual GP, counselling and mental health support can help to prevent employees having to take absence or reduce the amount of time they do need to take.
Feeling Valued
Insurance policies that protect employees and their loved ones are seen as the most attractive employee benefit.
Offering protection such as Employee Sickness Insurance shows that you listen to the needs of your workforce. This shows that you value them, promotes wellness, and establishes a positive company culture.
How Much Does Employee Sickness Insurance Cost?
There are a range of factors that will impact the amount your business pays for Employee Sickness Insurance.
Some of these factors you can control, whereas others you can’t. Before taking out a policy, it’s important to understand what these are.
Policy Factors
When it comes to taking out a policy, the premium amount you pay will be impacted by the following:
Level of Cover
The higher the level of cover you would like to provide your employees, the higher the premiums will be. Most providers will cover anywhere between 50-80% of an employee’s income.
Length of Payout
Most policies will allow you to choose a payout length. This can be for 1, 2, or 5 years, or until an employee’s retirement age. The longer the payout length you choose, the higher the premiums will be.
Deferred Period
To keep costs down, some employers will choose a policy with a longer deferred period. This is the time from an employee being off sick and the policy actually paying out.
EXPERT TIP 🤓
You can usually get a small discount if you’re able to pay your premiums annually rather than monthly.
Business & Employee Factors
As well as policy factors, there are some factors that are specific to your business and its employees which will also impact the cost.
Staff Ages
Unfortunately, the older we get, the higher the risk of us becoming unwell and needing time off. As a result, insurers will increase the amount you pay in premiums to mitigate the risk of someone needing to claim.
Salaries
Employer Sickness Insurance covers a portion of employees’ wages, so employee salaries will have a bearing on the overall cost. The higher your employees’ salaries, the more you can expect to pay in premiums.
Occupations
Riskier jobs such as manual work tend to have higher premiums. This is due to the fact the risk of someone needing to take time off due to accident or injury is much greater.
Pension Contributions & National Insurance
Another factor that will impact the cost of your Employee Sickness Cover is if you choose to cover an employee’s National Insurance and Pension Contributions. As you will need a higher amount of cover to do this, you will pay more.
Combining With Extended Sick Pay
You can combine employee sickness insurance with an extended employer sick pay policy. This is an effective way to lower your insurance premiums.
Example Employee Accident & Sickness Insurance Premium Cost
To give you an idea of how much you can expect to pay, we have provided an example below. It highlights the cost of protection for two different employers.
These are only examples, so for a more personalised quote, contact us on 02074425880 or email help@drewberry.co.uk.
How Does The HMRC Tax Employee Sickness Insurance?
Employee Sickness Insurance premiums paid by employers are generally considered a business expense. This means that they are tax-deductible.
As an employer, you can exclude the amount you spend on premiums from your taxable income. As a result, you can reduce your overall tax liability.
Are All Health Issues Eligible For Cover?
If known, you must disclose details of staff with any pre-existing conditions when setting up your cover. Each insurer has its criteria on what information they will cover based on their condition, circumstances, and degree of risk. If a staff member has a pre-existing health condition, an insurer may decide to:
- Provide cover for the condition with standard terms attached
- Provide cover for the condition but require the member to make a payment of an additional sum
- Exclude the condition from the policy, but provide a date when they will review it again
- Exclude it entirely with no opportunity to review
If your employee has a pre-existing condition, it’s good to speak to an expert before taking out employee sickness insurance. Drewberry has direct access to underwriters at every top UK insurer and can help get the best possible terms available. Get in touch with us on 02074425880 or by email at help@drewberry.co.uk.
Is Employee Sickness Insurance Classed As A P11D Benefit?
No, it’s not classed as a P11D benefit. However, you should get corporation tax relief on your insurance premiums.
What Benefit Amount Should Employees Be Covered For?
The amount covered is based on a percentage of staff’s salaries. You can choose how much of their income you wish to insure. It is exempt from default retirement age legislation, so you can stop providing it when employees reach the state retirement age.
Who Are The Best Employee Sickness Insurance Providers In The UK?
Providing the best employee benefits for your business will ultimately come down to the policy and the provider that is best suited to your circumstances. There’s a wide range of insurance providers to choose from and, at Drewberry, we work with the UK’s top providers.
For Employee Sickness Insurance, this includes:
- AIG
- Aviva
- Legal & General
- MetLife
- Canada Life
- Unum
Additional Benefits
When comparing providers, it’s important to look at the additional benefits they provide. Most now provide a range of extra benefits which you and your staff can access. Some even extend the offering to family members, too.
Employee Assistance Programmes
Policies often include Employee Assistance Programmes (EAPs). These provide extra services that support workers’ physical, mental and financial well-being. Services can include:
- Legal, medical and financial advice
- Counselling / cognitive behavioural therapy (CBT) face-to-face or over the phone
- Bereavement counselling;
- Information and guides, either online or over the phone.
A top feature of EAPs is that access to the services is free without having to make a claim. In fact, many of the services aim to prevent absences and potential claims.
Other Free Additional Benefits
Some income protection providers also offer additional features, such as:
- Virtual GP Services
Provides access to healthcare professionals through an app, website, or helpline
- Second Medical Opinion
Enables staff to get a second medical opinion if diagnosed with a serious health condition
- Rehabilitation Services
Many providers offer Physiotherapy, Occupational Therapy and Consultation services.
Compare Employee Sickness Insurance Quotes & Get Expert Advice
Setting up a new employer sick pay insurance policy doesn’t have to be complicated, but you must get it right. That’s where we can help.
Our online quote comparison tool will help you to make sure you get the best Group Income Protection insurance for your team members. You can also find quotes for Group Life Insurance, Group Critical Illness Cover, and Company Health Insurance.
We have a dedicated team of experts who will collate and compare quotes for you from all the top UK providers. You’ll then receive a recommendation report that details the best solution for your business.
Why Speak to Us?
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.
If you need help setting up a employee benefits package for your employees, email help@drewberry.co.uk or call us on 02074425880. Our friendly expert advisers are happy and ready to help.
