You get what you give
Richard Catt provides an overview of the benefits of life insurance and of how the CFA can help members in this respect.
TAKE care of your employees and they’ll take care of your business,’ says Richard Branson, founder of the Virgin Group. Wise words, wouldn’t you say? Our Scottish committee chairman, Willie Armour of RJM Flooring based in Glasgow, tends to agree.
Willie believes passionately that employers should offer benefits in the event of death, even if it’s not during working hours. This is, he feels, a reasonable return for his employees’ loyalty to his business. Because of this, he asked the CFA to do some research into life cover on behalf of CFA members.
One of the first things I learned from my investigation was life insurance is more heavily regulated and more specialised than other forms of insurance and I therefore had to seek specific guidance. This article is designed to share some of the findings gained from the industry experts I approached.
Setting up a workplace pension, prompted by auto-enrolment, is for many employers their first experience with wider employee benefits. However, there are several other employee benefits an employer can consider putting in place for employees.
The primary considerations for the employer are - What will be the benefit of doing so? And if I do provide additional benefits, how much will it cost me?
With regards to the potential benefit to an employer, historical research has shown that, those employers who provide more than just a basic salary package to employees, are likely to gain advantage in both staff recruitment and staff retention.
As a result, this can help to make an employer that bit more attractive over another company. This has never been more relevant than in flooring now, where good fitters are becoming scarce and retaining loyalty is therefore important.
An employer purchasing financial benefits for a group of people will often be able to source a cheaper package than if employees were to purchase their own individual policy from the high street. The benefit, therefore, has a greater value to the prospective employee than the actual cost to the employer.
The most common type of benefit offered by an employer tends to be group life cover and the remainder of this article primarily focuses on this option.
Group life protection
What is it?
If the worst happens, life insurance financially supports those left behind if your employee dies in service. This can include cover for their spouse or partner and the package can be tailored to include insurance for activities or events not connected to work, if that is desired. Fortunately, flooring isn’t a high-risk activity and so this added extra could be essential for it to be seen as a true benefit to employees in the flooring sector.
Group life is one of the more cost-effective benefits, and it’s a good place to start for small- to medium-sized (SME) employers. Implementing this as a secondary benefit to a workplace pension is a natural complement, by providing financial protection for your staff pre-retirement.
A group scheme is simply a way of delivering life benefits based on all the employees in a company, thus making it more cost effective.
A bit more about cost
With regards to cost, according to the 2016 Swiss Re Group Watch report the average cost is *£115 per employee per annum.
* Note that employers traditionally put cover in place to provide a benefit linked to a multiple of an employee’s earnings ie 2 x basic salary, and the cover can then be reviewed on an annual basis. On this basis then the cost of providing cover would typically be lower than the figure given above as the life insurance benefit is likely to be much lower.
Additionally, group life insurance enjoys favourable tax treatment for employers and employees. For employers, the premiums paid can normally be treated as a business expense, subject to the employer’s local inspector of taxes. For employees, group life insurance won’t be treated as a Benefit in Kind (P11D). Finally, through the use of a trust, benefits are usually paid tax free.
Flooring industry standard
Finally, industry figures show 22% of companies in the Construction & Building Maintenance industry with between 0-49 employees are already providing this type of benefit to their staff.
For the 22% that do currently offer a scheme to their employees the next renewal presents a good opportunity to review the cost and benefits that they are currently providing, as you would with household or car insurance, to ensure the price remains competitive.
For the 78% that don’t currently have any type of scheme- in place, seeking the help of a financial adviser is a good place to start, as they can use their expertise and experience to research the employee benefits market and collect quotes for a package that will suit an employer’s needs and budget.
The CFA retains the service of a specialist financial planning company - Cambourne Financial Planning. Richard Wilkinson (chartered financial planner) Tel: 01509 211011 would be happy to advise CFA members on the best scheme and provider for their company and employees. The initial consultation is part of your CFA member benefits.
Richard Catt is ceo of the CFA