Look after your team,
and keep them.

What are employee benefits?

In the protection market, “employee benefits” usually means group risk: the insurance an employer buys to cover its staff against death, long-term illness and the cost of treatment.

The defining feature is who owns what. The employer is the policyholder, the employer pays the premiums, and the employer decides the eligible categories of staff and the level of cover. Employees do not buy the policy and generally cannot take it with them when they leave.

That structure is what makes group cover cheap relative to individual policies. Insurers price a whole population rather than an individual, so healthy and less healthy employees are covered on the same terms, usually with little or no medical underwriting up to a threshold.

The four core products

Group life insurance , commonly called death in service, pays a lump sum, usually a multiple of salary, to an employee's family if they die while employed. It is the most widely provided benefit and generally the cheapest.

Group income protection pays a proportion of an employee's salary if they are unable to work long term, after a deferred period matching your sick pay. Good schemes also fund rehabilitation support aimed at getting people back to work.

Group critical illness cover pays employees a lump sum on diagnosis of a specified serious condition, whether or not they can still work.

Group private medical insurance funds private diagnosis and treatment, which typically shortens absence considerably compared with waiting for elective NHS treatment.

Why employers put schemes in place

The commercial arguments are recruitment, retention and absence. Benefits are visible in a job offer in a way that a marginal salary difference often is not, and group income protection and PMI both act directly on the cost of long-term absence.

There is a simpler reason too. Small employers frequently keep paying a valued employee well beyond any contractual sick pay because the alternative feels unconscionable. That is an uninsured liability sitting on the business. Group income protection turns it into a known premium.

How much it costs and how it is priced

Group schemes are priced on the workforce as a whole: the number of employees, the age profile, the mix of occupations, salaries, the benefit level, and the claims history where one exists.

Most schemes operate a free cover limit, a level of benefit provided without individual medical underwriting. Employees whose benefit exceeds it are underwritten individually, which usually affects only a small number of senior staff.

Any figure quoted before a formal scheme quotation is illustrative rather than a price.

The tax position in outline

Premiums for group risk benefits are generally an allowable business expense for corporation tax where they meet the wholly and exclusively test.

Treatment for employees varies by product and is the part worth checking carefully. Group life written under a registered scheme and group income protection are not usually taxable benefits in kind for employees, whereas company-paid private medical insurance normally is, and appears on the P11D. Critical illness sits between the two depending on how it is arranged.

Tax treatment depends on your individual circumstances and may change in the future. Cover Your Family is not FCA regulated and does not give advice. We pass your enquiry to a separate, FCA-regulated adviser who will design the scheme and confirm the tax position with your accountant. There is no charge to your business.