Ask any Finance Director what keeps them up at night and cost volatility is likely to be high on the list. In today’s economic environment controlling costs as much as possible is a major priority for any business. 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.
Staff absence through illness or injury costs employers £600 per employee per year on average. This represents a significant outgoing, particularly for small and medium sized firms who need to look after their key talent and make sure they are as productive as possible for the business. Looking at average costs can be misleading. Firms need to protect themselves against the risk of a worst case scenario, not the average, and the duration of a period of sickness absence and the ease of returning to work can vary widely. Employers do appear to recognise this: 84% of HR professional say that managing sickness absence is of strategic importance.1
Sick Pay Insurance (SPI), to cover short term sickness absence, has been developed in response to demand from employers, who are eager to ensure that they protect their staff, their biggest asset, much as they would insure their equipment. By meeting their needs through minimising both the direct costs of absence, including temporary cover and sick pay, and indirect costs such as lower productivity and morale, it can give them one less thing to worry about when it comes to running their business and planning for the future.
Ask your client what would happen if a member of staff suffered an accident or illness that kept them off work for three, six or even 12 months. 63% of companies with over 100 employees do pay some form of Occupational Sick Pay over and above the statutory level, clearly showing they recognise the business need to plan ahead for short term sickness absence.2 On top of this though, how would they absorb the cost of the employee’s salary, plus that of a short-term replacement? Then factor in the recruitment costs of finding that replacement and the loss of productivity as they come up to speed and their team adapts to new leadership and the costs begin to mount.
In such a scenario, sickness absence clearly has the potential to cause major business disruption, particularly for SMEs. SPI is designed to protect against such a situation and minimise the impact of short term absence. SPI provides employees with a regular monthly income if they are off sick for up to 12 months, while employers enjoy the cost certainty of paying just one regular monthly premium.
However, sickness absence carries other hidden costs as well. The absent employee will have valuable skills, knowledge and relationships which the firm will not want to lose. How do you ensure that the 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 manage these hidden costs, SPI also includes access to an Employee Assistance Programme (EAP) 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.
SPI policies are designed to complement both existing sick pay schemes and long-term Group Income Protection. They can be tailored to suit the employer, with a choice of deferred periods from 1 to 4 weeks and payment periods from 12 to 52 weeks. In addition, employers can choose from a range of benefit amounts to replace a percentage of an employee’s earnings, up to a maximum of £6,000 per month.
At a time when many employers are focused on complying with pensions auto-enrolment, you can really add value for your clients by advising them on how to create a holistic employee benefits package that will meet business objectives. You will also benefit from working alongside us to grow a new revenue stream with huge potential for the future.
For employers in the current climate, ignoring exposure to the risks of staff absence is a chance that is just not worth taking.
1People Management survey commissioned by Unum,
2Holden Pearmain research commission by Unum, 2012
Customer Solutions Director