As an SME owner, you manage a group of people who you rely on to help your business reach its targets. Just like you, your people have families to support and costs to cover.
So what happens when they can’t work for a while, due to illness or an injury? Do you want to be the employer who buries their head in the sand when it comes to a health catastrophe, or do you want to be mindful and conscious of the impact on that person and their family’s economic stability?
I’m hoping the latter. In which case, you’ll want to ensure your employee is prepared in the event of them becoming incapacitated. One of the first things you should be thinking about when providing catastrophe cover for your people and their families, is extended sick pay cover. This is a risk solution for both you and your people. It will supply continuing income for a person who is off work for a prolonged period, without you having to self-insure and bear short, medium and potentially long term costs.
The first step is thinking clearly about the risk and establishing an objective sense of its impact on you and your business. Being off sick for four weeks or more in a year is a 1 in 32 risk (Association of British Insurers). Higher than one might expect. Only 2 million (Swiss Re Group Watch) of a 31 million workforce in the UK (ONS) have cover in place, demonstrating a massive gap between the need and what is actually being covered.
Full extended sick pay cover costs between 1 per cent and 2 per cent of total gross payroll a year. This form of protection can be expensive for a small business looking to keep costs down. However, that doesn’t mean providing some kind of catastrophe cover is out of your reach. You should also be thinking about critical illness insurance – an employee benefit that pays out a lump sum direct to the employee in the event of a person having an illness such as a cancer, heart attack, or stroke.
The reality is that things are changing really fast. Cancer is now what most of us will die from, with 2.5 million people in the UK currently living with cancer (Macmillan) and the number of people dying from heart attack in their middle years falling. It is great news that people are now surviving cancer for many more years. People are now living with cancer, on average, for 10 years, compared to just one year in the 1970s (Macmillan)
Do improving survival rates mean that a diagnosis of cancer is not a catastrophe?
You have to bear in mind that survival rates improve as a result of rapid developments of new diagnostic methods and treatments. Bringing it down to an individual level, those new methods may have a big impact on your employee if they require intensive courses of treatment after being diagnosed. A lot of people will work through it, but they may not be able to work full time for an extended period. And that’s the beauty of critical illness cover – it’s a like a catastrophe bridge for families.
It provides a financial cushion that means a person living with a debilitating illness can work a bit less, or their partner can change their own working pattern to support them. Having a lump sum to draw from, can help pay off a mortgage or pay for treatment unavailable under the NHS or private medical insurance. Just because conditions such as cancer and heart attacks don’t always kill you anymore, doesn’t mean they’re not catastrophic to people and their families, with the potential to wreak havoc in the family finances.
Critical illness paid for by you, with the ability for an employee to buy a top-up, is a really underused benefit – one that is flexible and good value. Many employers think this is out of reach, they’re too small a company, can’t afford it or have no real sense of the cost versus value. To put it into perspective, providing critical illness for a group of 10 employees with a £50,000 lump sum benefit, you would be looking at paying between £1,000 and £1,500 per annum.
Right now government is making us all set up an employee benefits scheme whether we want it or not. That is Auto Enrolment to a Workplace Pension. I expect you have heard about it. When you’re through doing what you have to do because the law has changed, ask your financial adviser to model the costs of a comprehensive benefits package, including life, extended sick pay cover and critical illness cover, you might be quite surprised about how much you can get for your people for a modest outlay.
Thinking about the big stuff in life is challenging and you inevitably start thinking about what type of employer you are. When an employee is at home and unwell, do you want to be sat in your office worrying about the fact you haven’t given them the option to secure themselves, or would you prefer to be able to send them a guilt free bunch of flowers and a get well card, knowing there has been a payment from the catastrophe cover policy?