Should you consider Executive Income Protection for your business?
If you run a business, large or small, Executive Income Protection can help protect against the financial impact of employee incapacity on your business.
Long term absence is unfortunately a common challenge for company directors or key employees
According to the Association of British Insurers (ABI) estimates that 1 million workers a year find themselves absent from work through sickness or accident.
Statutory Sick Pay for both employees and company directors is just £96.35 per week for 28 weeks. There are very few people able to maintain a quality of life for even a few weeks at that level of income. This is where Executive Income Protection can help companies support staff through difficult periods.
According to the ONS families spend around £587 per week which means there is a significant income back during these difficult periods.
What is Executive Income Protection?
An Executive Income Protection plan would pay your business a monthly benefit in the event of a valid insurance claim. You can use this to fund your employee’s ongoing sick pay if they are unable to work for any reason (due to illness or injury). As a result this type of group insurance can help employees meet financial commitments without relying on savings or benefits.
There are a number of insurers offering executive income protection and each policy will offer different types of cover or benefit. An independent insurance specialist can help you evaluate the options available and make the right decision.
What does Executive Income Protection cover?
Executive Income Protection cover can include:
- Employee earnings,
- P11D benefits.
Executive Income Protection – key features
The monthly benefit from your insurer is paid to you (the employer) and passed on to your employee via PAYE.
Generally this type of cover is designed for SME businesses and depending on your insurer, may cover up to 80% of your employee earnings.
As mentioned, NI and pension contributions may also be included.
3 core benefits of Executive Income protection
- Executive Income Protection will usually count as a tax deductible expense and is therefore more tax efficient than a personal income protection policy for your employees.
- If your employees are unable to work for any reason and have to rely on savings or benefits to pay the bills, this will likely be a very stressful period for them. As an employer, you will likely gain loyalty and gratitude from your workforce if they don’t feel stressed about money worries whilst they recover.
- Creating a competitive benefits package will help you both attract and retain employees allowing you to grow your business confidently and without suffering high rates of staff turnover
Executive Income Protection is something you should carefully consider. The benefits to the business could be significant if you find you or your employees are unable to work for an extended period.
Managing an employee after long term sickness may require careful planning and sensitivity. There is some great information on the NHS website to help you navigate this period.
If your employees experience reduced stress levels through their recovery without money worries this may help them return to work more quickly and hopefully in better health, meaning they can return to normal duties more swiftly and reduce the impact on your personal workload as a business owner or manager.