Think-tank Demos has called on bosses to offer employees income protection (IP) schemes this Christmas to boost morale and productivity.
A Demos report published today Duty of Care has used data from major employers to outline the gains made by businesses that invest in employee financial wellbeing.
The research finds that offering benefits such as financial advice, group-access to IP and pension planning products incentivises employees, lifts morale and reduces staff turnover.
It also showed a positive impact on skill-retention and recruitment costs.
IP covers only 9.4% of the UK workforce compared with around 30% of the US workforce, the report said. Demos added that higher up-take could save taxpayers £2.24bn a year in means-tested disability benefits.
Max Wind-Cowie, head of the Progressive Conservatism Project at Demos and author of the report, said: "In an era of stagnating wages and increased concern about financial insecurity, the role of insurance and long-term financial planning has never been more important."
He added the government needed to work with business to take protections currently available to the few and extend them to the many.
Demos researchers analysed survey data by trade body Group Risk Development (GRiD) and found; UK employers with 100 or more employees are five times more likely to facilitate IP than small businesses; employers in the south of England were 10% more likely to offer such products; and 1 in 6 companies offered IP to demonstrate loyalty to staff.
According to the report, employers felt offering income protection policies helped secure highly skilled staff where higher wages were not possible.
Peter O'Donnell, chief executive of Unum UK, said: "Employees are three times more likely to be out of work due to illness for six months or longer than they are to die during their working life. Yet most companies provide life insurance to all staff while just 1 in 10 employees is offered a financial back-up plan to protect their income should they be on long-term sick leave.
"Providing all employees with Income Protection makes for more predictable annual costs and is one of the few employee benefits to provide a valuable saving for the employer if you do need to claim."
A Harvard Business Review study found that insurance against sickness and disability can improve return-to-work rates by as much as 43% and concluded that employees were at their most productive when financially secure.
According to Demos, interviews with employers that did not offer IP highlighted "a series of myths" about the group cover including concerns about bureaucracy and employee incentive to take sick leave.
Demos argued that government and local governments needed to reduce bureaucracy for employers by encouraging the pooling of HR resources to lessen cost.
