group income protection

Group Income Protection

Only 6% of  the 24% of UK employees that say they would like to receive income protection actually get it! There are a number of types of protection out there. This article will help you make the difficult decision about whether group protection is right for you.

What is group income protection?

Sometimes, employees find themselves unable to work due to illness or injury. Group Income Protection (gip) gives these employees a replacement income. So, it is taken out by companies as an employee benefit, and gives salary protection insurance. 

As an employer, the benefit is a great way of showing that you have your employees back. Group income protection offers support after sickness pay finishes.

If an employee suffers a long term illness or injury and cannot return to work, the group income protection insurance you have given them will provide support for their finances.

The income protection benefit will be paid to employers through the PAYE system. Then the employer gives the payment to the sick/injured member of staff.

Topics that you will find covered on this page

Am I eligible for a group income protection policy?

This depends whether your employer has signed up to an income protection group policy. If they do and you experience illness or injury and are unable to return to work you can make a claim. The responsibility of making the claim falls is in your hands, not your employer’s. 

Remember, the deferral period might be lengthy. To find out exactly how long, you will need to ask about your specific group income protection scheme. 

To avoid being out of pocket, if you are eligible for a payout make the calls to your managers sooner rather than later. This helps prevent your spouse and children suffering financial struggle, for example if you have household bills to pay. 

If my employer does not offer gip is salary sacrifice a good idea?

In some cases, a group policy might not be covered by the company. But this does not leave you out of options. Salary sacrifice is essentially a voluntary group income protection policy, but you still need to speak to your employer and hr to set it up. 

The difference is that protection is not paid by your boss but using your own salary or funds. Whilst this has a cost, salary sacrifice is a useful resource for covering your lost salary when statutory sick pay ends.

Here is a video that explains how it all works.

Are all health issues eligible, or are there exclusions?

You might not be covered if you have had a past diagnosis. This is even more likely if you received treatment for the issue. 

For mental health conditions, treatment includes counselling sessions or some other form of intervention. 

Normally, a person will not be eligible to claim if they take absence due to these conditions or problems. If your condition might be a problem, consider other cover to help protect your partner and kids. 

Will my pension be affected by group income protection ?

If you make pension contributions via your job, gip may not replace these. Often, plans only cover the bare minimum- that is your salary only. 

You might be lucky, and have an employer that pays more for a policy including features like pension contributions into their policy. But remember, these additional levels of protection come at a cost, so it wont always be in your employers best interests.

Should I include pension cover for my employees?

If you are an employer, professionals can give you tips if you are unsure whether you should cover pension contributions.  Have a chat with an adviser, they will explain the risk by making an assessment of your organisations aims and resources.  

Will my gip cover holiday pay? 

Again, the requirements for holiday pay differ. So, to find out, employees should speak to the management. They have copies of the relevant documentation and can provide you with protection knowledge and conditions. 

Speaking with those that handle the policy at your place of work is important, to ensure you have an accurate understanding of your entitlements and size of your cover. 

Income protection and employee assistance programmes: is there a difference?

If employees who are unable to work long term income protection financially supports them. The idea is that hopefully the employee will return to work at some point. 

This differs from an employee assistance programme (eap), which is more of a preventative device. They promote the wellbeing of employees. This is beneficial as it helps stop potential future absence. 

Should I grant staff access to an EAP?

With an Employee Assistance Programme (EAP), employees can access wellbeing services, tools, and treatments, which can increase productivity. Sometimes the pressure of balancing work, childcare, relationships, a family, bereavement etc. can get too much. This may result in long term leave. 

An EAP benefits the business as early intervention prevents absence. It is also nice to help employees. Different companies offer different solutions, so think about what you want your staff to be able to access. Almost all have a helpline staff can report to.

Some companies offer a bundle package of EAP and GIP. Aviva are one network that do this. The more cover you have, the more you protect your liability risk. You also help to better the lives of your employees, which can help you attract the best talent to your company.

salary protection insurance

How do I choose an insurance policy?

The vast range of policies out there can make things confusing. Below, we discuss some main details to look out for. 

Perhaps the most important thing to consider is the percentage of earnings you want to cover. Furthermore, do you want all employees to receive the same level of cover? Given that gip is an incentive, it is not uncommon to provide a better benefits package for the longer serving employees in your workforce.

You also want to think carefully about the deferral period- how long employees must be absent from the workplace until the assistance programme starts giving payments. The point at which the GIP takes over will normally depend on the length of sick pay employees get, since gip kicks in once sick pay runs out. 

One final thing to consider is the duration of benefit payments. Some offer support services up until retirement/state pension age, so they have no policy cease age. Remember though, premiums tend to fall with policy duration. 

Of course, the above factors form just part of the decision. Some businesses include an early intervention strategy, too. An example of this is the employee assistance programme. This is a nice touch, and a smart health policy move. It helps your employees overcome their problems, lowering their risk of long term absence. 

We  strongly recommend consultations with advisers before agreeing to a provider. The bottom line is that, whilst you might want to offer the best benefits, budget will impact your choice. Expert guidance can answer your questions and help you consider the business expense. 

Can I claim ESA If I have income protection insurance?

You are still entitled to employment support allowance (ESA) even if you claim on their income protection gip.

The two payments are funded in different ways. 

Your employment support allowance comes under the umbrella of state benefits. Because of this, it is funded by your national insurance contributions.

On the other hand, your employer pays your GIP as one of many employment costs, though a policy is voluntary. 

Who are the main Group Income Protection providers in the UK?

There are a great number of different providers on the market to make your selection from.

Some insurers to check out are AIG, Aviva, CanadaLife, Legal and General, and Unum. These are just a few of the main providers out there, so do not limit your search to just the above.

With so many options employers might want to seek advice, to get the best deal. 

If you do not speak to advisors, you should definitely spend time shopping around.

It is crucial that you choose the income protection plan that brings the best business benefits for the lowest cost.

income protection benefit

What will group income protection cost? 

The sizes of quotes you get depends on multiple factors. The length of deferral period, the l time the payout will last, and whether you give pension contributions, all form a large part of the pricing. 

In all cases costs are a percentage of your gross payroll. As a guide, temporary plans might begin from as little as 0.25%. Long term plans are higher, often costing 1% to 2%. 

The exact cost of your quote will depend on what details you consent to in the policy terms. To help keep fees down, you might want to pay annually, rather than monthly. Some specialists will give discounts for doing this. 

Are GIP policies subject to TUPE rules?

TUPE rules ensure that your rights are protected  if the administration of your company changes. So, should your duties be transferred to another employer your GIP payments still continue! Pension plans also continue under TUPE rules too.

Remember to take the opportunity to speak with your new account manager once the transfer is done. It is important to have a discussion with them to check how the payments will continue long term. 

What does group income protection insurance cover?

Any kind of medical problem that leaves an employee unable to work, or to return to work is covered. Be it cancer, a heart attack, a severe injury, or a stroke- your GIP will protect you. 

Is stress covered under income protection?

Stress and other mental health conditions including depression, and anxiety, are all covered. These are all valid conditions for which clients might need long periods of time off work, so companies cover clients for this. 

what is group income protection

If I am made redundant do my payments continue? 

In some cases a client may be able to receive payments for an ongoing claim, even if the employer has to end their contract. This is called ‘pay direct’. 

However, normally your average group cover will not cover the areas of dismissal and redundancy. Nor will it cover you if you choose to leave at any stage. If you hand in your notice and officially leave the office, you are no longer a member of the ‘protection group’ and cannot access benefits. 

Can a claiming employee access rehabilitation services? 

Rehabilitation services might not be included as standard but many providers include rehabilitation support and/or a treatment plan for an absent employee in the terms. 

The benefit of having this written in the insurance documents is that it can help get your staff back to work quickly, especially when gp services are stretched and waiting lists long. 

Experts will evaluate and give their opinion on the nature of the problem. Then they decide on the support- it could be counselling or even physiotherapy. 

It is understandable that employees want to get back to work as soon as they can, as GIP does not cover a salary in full.

Ask your case manager if rehabilitation is included, and if so, get the relevant contacts. Then, you can arrange assessment meetings and any appointment you might need. 

How are  group income protection payouts calculated?

As head of a company, you need to consider the group income protection provider you choose. You might want to consult professional expertise to help you decide on this option in line with your budget.

Your staff do not just get a fixed amount. Instead, the insurer pays a percentage of the employee’s salary. You have some control over this amount, and can discuss the details with the provider. 

Individuals can access anything up to 80% of total salary, depending on policy type and arrangement. 80% is the highest percentage you can cover. This is to encourage fast employee return after sickness/absence. 

So, group income protection is helpful for employees, especially those with families. But, the service,  also provides an incentive, helping people focus on their rehabilitation and recovery journey.  

How are payments made?

It is quite a simple process. After undergoing the claims process, the claims team of your provider will pay the income protection to the employer. 

There will be a specific claims team that pay the income protection at the agreed rate, directly to you. Then the PAYE system is used by the accounts team at your company to pay the financial support. 

Does it pay in instalments or as lump sum settlements?

Normally the PAYE system is used and the claiming team members get GIP paid monthly. So, if you find yourself in the situation of making a claim, do not assume access to a lump sum. For successful claims, monthly payments are the standard way.

But, in some situations financial support as a lump sum just makes more sense. To get lump sum payments of group income, the organisation takes a case by case approach. 

The underwriting of lump sum payments also varies depending on who the individual provider is.  

group income protection scheme

Will tax deductions be made on my group income protection?

The group income protection is in place of your salary, so national insurance contributions and income tax must be paid. You cannot access discounts or corporation tax relief, sadly.

On the plus side, group income protection is not considered to be a P11/ benefits in kind. So there is no extra charge for tax, helping to calm some money worries at least. 

What is the tax?

One of the perks is that group income protection tax is deducted automatically from your employee assistance funds, you do not have to do anything. 

The PAYE system that most employers use as the basis of their payment system costs and deducts the debt before you are paid. 


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Meet the author

Rob Atherton

Rob Atherton

Rob writes and edits the content produced by the rest of the team. He has a degree in History from Leeds University and has producing, reviewing and editing the site since 2016

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