The insurance sector has a vital role to play in helping companies plan their spending and protect their key assets against risk. However, most businesses still tend to protect their property and have no protection for their biggest asset of all – their people.
On average, staff absence through illness or injury costs employers £600 per employee per year. This represents a significant outgoing, particularly for SMEs who need to look after their key talent and make sure they are as productive as possible. Employers do appear to recognise this as a serious issue: 84% of HR professionals say that managing sickness absence is of strategic importance.
Long term disability insurance, often referred to as group income protection insurance, is a long established insurance designed to pay a percentage of salary to an employee unable to work long term due to accident, illness or injury. Successful claim benefits are typically paid to the employer to pass on to the employee via payroll after a period of absence of between three months and a year.
Historically, in the UK, there has not been an insurance product to cover the liability relating to short-term absence. Employers have relied on their own sick pay policies to provide the employee with an income during this period whether that is full pay, reduced pay or simply statutory sick pay.
However, a new insured product is now available described as sick pay insurance (SPI), designed to cover short-term sickness absence. This has been developed in response to feedback from employers who are eager to ensure that they adopt a more holistic approach to managing and indeed preventing short-term absence. SPI policies are designed to complement both existing sick pay schemes and long-term group income protection schemes. They can be tailored to suit the employer, with a choice of deferred and payment periods. In addition, employers can choose from a range of benefit amounts. Although a fairly new product in the UK, evidence tells us that average number of claims is 100 per 1,000 employees per year with the average premium cost being £200 per employee per year.
As well as the direct cost of sickness absence, there are many hidden costs related to absence to consider too. The absent employee will have valuable skills, knowledge and relationships which you will not want to lose. How do you ensure that your employee remains engaged with the firm while away, that they have the right rehabilitation support to enable them to return and that their transition back to work will be managed sensitively?
To achieve this, SPI includes access to an employee assistance programme and rehabilitation expertise. This can help an employee avoid a period of absence in the first place, and help them return to work if they do.
If staff health and wellbeing is not on your boardroom agenda, the overwhelming statistical evidence suggests that it should be. For today's employers ignoring exposure to the risks of absence is not a chance worth taking.
We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2014. code: 14/989 expiry: 28/02/15
