PG Mutual’s chief executive officer, Mike Perry, discusses ways to protect an employer from the impact of long-term employee sickness.

In the current economic climate, UK employers are facing tough times. While most businesses have to save money and cut costs wherever possible, it appears that one huge cost is often largely ignored by UK employers – that of long-term sick leave.  According to research by the Centre for Economics and Business Research (Cebr Report The benefits to business and the economy of early intervention and rehabilitation*), the bill for long-term sickness leave costs private sector businesses £4.17bn per year. The bulk of the cost mainly comes from companies’ own sick pay policies, whereby in some cases employers are providing full pay to the absentee for a set number of weeks, followed by a period of half pay.  Add to this the cost of replacement staff salaries, recruitment and training for replacement workers, and the overall loss of productivity, and long-term sickness leave becomes expensive.  It appears that many companies are either unsure of their responsibilities in terms of sick pay obligations, or just continue to pay those who are off sick long-term, despite them contributing nothing to the profitability of the business.  In other cases, businesses treat employees’ circumstances on an individual basis; meaning that some may benefit more than others. In either case, the cost to the business can be extensive, and if a policy is not consistent, it could be expensive.  Even where businesses do have sickness pay policies in place, they are not always adhered to correctly.  Sickness policy planning should be a key part of managing a company’s business risks.  By taking out an income insurance plan, an employer turns a potential unbudgeted loss into a fixed monthly cost – this means that, for a set amount a month, the possibility of a business paying out unscheduled sick pay for an unknown period of time is eliminated. 


As an employer, you are responsible for operating a statutory sick pay (SSP) scheme, which includes making payments to employees who meet the specified qualifying conditions.  The weekly rate of SSP for days of sickness from April 6, 2016 is £88.45**.  If you are self-employed, and your National Insurance contributions are up to date, then you do not qualify for SSP.  Instead, you would be required to apply for Employment Support Allowance (ESA).  For those who qualify, the level of ESA is currently £73.10* per week – resulting in a significant drop in income.  PG Mutual offers AIA members and their staff tailored income protection cover to suit their needs and budget.  This means that for a small, affordable monthly amount, a business can eradicate the risk of spending thousands of pounds on staff sick leave, as well as gaining the reassurance that they have a fair and appropriate staff sickness policy in place. 


PG Mutual is working with the Association to provide access to exclusive income protection solutions for AIA members. As a member of AIA you are entitled to a 20% discount off your first two years' cover^.  To obtain a no obligation quotation, use this link www.pgmutual.co.uk/quotation.  Remember to use ‘AIA’ in the discount code. 

For more information on income protection insurance from PG Mutual and our terms & conditions, visit www.pgmutual.co.uk or call 0800 146 307. 

* CEBR Report, 30 Oct 2015
** DWP, April 2016
^ For full terms and conditions, visit www.pgmutual.co.uk