The future of employee benefits
Benefits that concentrate on tackling employee ill-health and helping people stay in work are gaining political traction.
In October 2016, the government released a green paper on employee benefits.1 The paper sets out plans to transform employment prospects for disabled people and those with long term health conditions over the next 10 years.
The report makes a number of suggestions to prevent people falling out of work for health reasons and to make employers feel more confident about supporting disabled employees.
In particular, it argues that group income protection (GIP) policies have a much greater role to play in supporting employers as they help people with health problems to stay in work – or return to it. The paper asks for specific policy ideas to increase the number of UK workers with GIP.
Many GIP policies come with a range of in-built extras that focus specifically on employee health and wellbeing. Those extras include training, support and advice on how best to look after employees with health problems.
The number of UK employees with income protection cover is low. In fact, estimates suggest that only around one in ten people have cover,2 and that more people insure their pets or their phone than their income.3
To help increase the number of workers benefiting from GIP coverage, the Association of British Insurers (ABI) has called on the government to consider a temporary tax break for employers who buy GIP.
At present, the ABI thinks around 2.1 million employees benefit from GIP. However, it believes if employers were given tax relief, cover would extend to around 3.6 million people – an increase of more than 70% – within five years.4
This could reduce the number of people who fall out of work for health reasons, protect the finances of those unable to work, and boost the productivity of UK businesses.
Another outcome, says the ABI, would be a reduction in their dependence on state benefits, potentially cutting the UK’s benefits bill by tens of millions of pounds a year. Research published by Landman Economics, a financial consultancy, estimated the saving would top £220 million over a five-year period if the extra people covered by GIP came off long-term benefits sooner and paid taxes again.5
There is also a growing focus on the role employers should play in employees’ mental health. A recent review,6 commissioned by the prime minister, made a number of recommendations for employers. Among other proposals, these included creating and communicating a mental health plan, developing mental health awareness for employees and encouraging open conversations.
Moreover, in its May 2016 report, ‘Building a healthy, productive workforce’, Unum, a leading UK employee benefits provider, asked the government to “break the financial stress cycle” that costs the UK economy £121 billion a year.6
“Unexpected drops in income account for two-thirds of debt problems and we know that people who have suffered such drops are in turn twice as likely to develop major depression,” says Liz Walker, Unum’s human resources director.
“The only way to break the cycle that causes money worries is to make changes at a policy level. A comprehensive government plan is needed to better build the financial capability of workers so they can prepare for the risk of being unable to work, while also enabling business to better protect their employees,” says Walker.
It seems clear the government will increasingly ask employers to take on more responsibility for the working health of the UK; although which steps they might take to help remains unclear.
November’s Budget gave little comfort to smaller businesses, although a cut to business rates may provide a little more money to play with. However, the picture on wage growth is grave. Despite high employment, the Office for Budget Responsibility estimates that, following the downgrade in productivity growth forecasts, real wages will now not hit 2008 levels until 2028.
Instead of looking to increase wages, the game changer for small businesses may be to look at its employee benefit package. Choosing the right benefit may help companies not simply to attract and retain staff, but also to ensure they are in a strong position when it comes to the health and wellbeing of their employees.
1 The Department for Work and Pensions and Department of Health, Improving lives: the Work, Health and Disability Green Paper, October 2016
2 Aviva, April 2017
3 Association of British Insurers, ‘Independent Review of Mental Health and Employers’, 2017
4, 5 Association of British Insurers, ‘Income protection tax break could extend financial safety net’, February 2017
6 Thriving at Work: a review of mental health and employers, Lord Stevenson and Paul Farmer, October 2017