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Can you afford to ‘replace’ a key employee if they are off work for an extended period?

3 Aug
by Suzie Business Owner & Senior HRBP

In our latest blog, Oneela Ahmad from Protect 365 and Suzie Bogle MD at Breathing Space HR discuss the benefits of an Executive Income Protection Plan (EIP) for businesses, to protect your employees if they can’t work due to illness or injury.

What are the key risks facing your business?

Oneela says:

Protecting your employees should be an integral part of any business plan. Losing the skills, knowledge and contracts of a key employee who can’t work due to illness or injury, can have major financial consequences both for them and your business. Although you can’t predict the future Executive Income Protection cover can give your business vital financial breathing space, and also a tax efficient protection plan for both you and your employee. It safeguard’s the financial future of your business.

Musculoskeletal and mental health are the main claims for sickness. 60% of SME’s said that staff benefits lead to better productivity, taking away being financially vulnerable at a time when the individual has health issues. That is why there are valuable everyday benefits for you and your employee when taking EIP.

Suzie Says:

An EIP scheme would lessen the impact of a key employee being absence for an extended period, EIP is not for short term absence.  An EIP scheme can allow a company to ensure that company sick pay is given to employees with the majority of the costs being covered by the EIP.  Any Company Sick Pay will include an element of Statutory sick pay, however it covers the cost of making up the difference between SSP and a full salary entitlement.  Obviously the same rules would apply in managing the sickness absence – Fit notes, employee visits, OH appointments and potentially capability dismissals.

What the EIP will enable a company to do is to “replace” the person who is absent, on a temporary basis, if the business demands this and free up salary payments as the cost of sick pay is covered by the EIP.

You can choose to insure key employees, or above a particular level of management where the risk of them being off sick for an extended period is a high risk to the organisation.

Company sick pay over the time (decades!) I have been in HR has been eroded as a costly benefit and in some way perceived as encouraging sickness absence. In HR we understand this but with good HR management, the risk of abuse of the benefit is vastly reduced.

With new attitudes to work following the covid lock downs, being a better, more flexible and caring employer is necessary to be attractive in a candidate lead recruitment market.

A good HR professional will be able to design the absence policy and procedure to ensure that there is robust management in place.

What is Executive Income Protection and how it works?

  • The business pays the premiums every month (from your gross profit) and the employee is insured against illness or injury that would stop them from carrying out their own occupation should they be off work.
  • Designed to cover 80% of Income salary. You can also chose to cover your employee national Insurance Contributions and employer pension scheme contributions, as an additional cover, at an extra cost.
  • The premiums under EIP are usually classed as a tax- deductible expense for your business and employer provided they are wholly and exclusively to run the business and the employee doesn’t have a financial interest in the business. EIP is more tax-efficient than a personal Income Protection cover for the employee.
  • Premiums are not classed as a P11D benefit in kind
  • Designed for small to medium sized businesses.

Added Benefits:

  • Business legal helpline with Tax and VAT advice, employment law and health and safety
  • Free access to solicitors and VAT experts
  • Doctors services, remote GP 24/7, second medical opinion, prescription services, remote physio and remote psychological services and more.

Suzie Says:

The added benefits are a key advantage, particularly benefits which can be promoted as beneficial to all employees who are in work.  Psychological services and GP appointments 24/7 are a winner!

Oneela Says:

Promoting staff benefits and additional support within your business for your staff is a key driver for staff retention, productivity and sustainability.


Examples of costs per month based on average salary of £20,000 for an office worker:

The below quotes are based on a non-smoker* with no health issues:

20 years of age £9.19/month

25 years of age £10.90/month

30 years of age £12.83/month

35 years of age £15.54/month

*If the employee is a smoker then premiums do increase.

For more information contact:

Oneela Protects

Business and Personal Protection specialist/ Wills and Estate Planning                   





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