Sick pay can be a confusing notion for employers and employees alike. Hannah Uttley explores staff coverage.
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“The return to work and rehab services can create a virtuous circle – if you get it right when the employer’s got someone who’s gone off long-term ill and it needs to tell the insurer early, especially if it’s stress or something serious. They’ll get involved early and they’ll invariably get the individual back to work before the end of the waiting period.
“So the insurers are happy because they haven’t actually paid out a claim, the employer’s happy because they’ve got their individual back to work, and the individual is happy because they’re covered,” Winter explains.
The gap between an employee falling ill and losing sick pay provisions and the insurance coming into effect can often be a way for employers to ensure that people well enough for work return at a reasonable time.
Thurston explained: “Sometimes we find that it is a conscious decision for any sick pay provisions not actually to dovetail with an insurance policy. They may have sick pay provision for 13 weeks but the insurance contract doesn’t kick in for 26 weeks.
“Now, on the surface, you might think it looks like there’s a bit of a gap there, whereas in reality that might be an intentional gap because the employer is actually saying at the end of that 13-week period, ‘If someone is genuinely still unable to work then the gap is not going to affect them coming back to work or not’.”
Plugging the gap
However, the introduction of GIP services which allow individuals on short-term disability sick pay to claim from week one of sickness could signal a change in the way in which sick pay claims are processed.
According to Towers Watson’s Winter, the idea behind the product is to “plug the gap” until long-term GIP takes over. And as rehab services have now become such an integral part of these insurance products, Winter explains that this makes it a controllable cost for the employer as it ensures it supports the individual in the return to work.
Winter believes lack of understanding among employees is the real concern.
“If you just look at the penetration of insurance, 11% of the working population is covered by an insured benefit and that’s woefully low. If people really understood the risk of long-term disability and the financial implications of long-term disability – ie, it is distinctly likely to happen to you and if it does, the state won’t pay or certainly won’t pay much – then I think they would be knocking their HR managers’ doors down asking for the cover”.
However, Thurston finds a lack of knowledge among employers of their own company schemes.
“It’s amazing how little we find that group income protection schemes have their design influenced by occupational sick pay arrangements and that’s because very often employers are not totally familiar with what they currently offer.
“Many times they’ll have to refer to their own house rules or policy terms and I think that extends down to their employees who don’t know either. Probably because, most of the time, it’s short-term sickness which tends to not get into the question of what the statutory sick pay or occupational sick pay arrangements are, so people just end up getting paid the vast majority of times.”
Winter added that the immediate availability of benefits such as travel insurance can often be a much more attractive and positive option to employees than income protection.
“It’s a natural human reaction but it is statistically naive and I think we as an industry and as employers will seek to change that opinion. If the state withdraws from this, they’ll need help – they’ll really need long-term help – and if you haven’t got insurance, the chances are there isn’t much help there for you.”