Group Income Protection UK: Employer Guide

What Is Group Income Protection?

Group income protection (GIP) is an employer-funded insurance policy that pays a percentage of an employee’s salary (typically 50–75%) if they are unable to work due to illness or injury for an extended period. It kicks in after a “deferred period” (usually aligned with the employer’s sick pay policy) and can pay out until the employee returns to work, retires, or reaches the end of the policy term.

Why Employers Offer Group IP

• Attract and retain talent – One of the most valued employee benefits, especially for higher earners
• Reduce sickness costs – GIP schemes typically include rehabilitation and early intervention services that help employees return to work faster
• Tax efficient – Premiums are a tax-deductible business expense and not a P11D benefit in kind for employees
• Manage long-term absence risk – Protects the business from the financial burden of paying long-term sick employees
• Duty of care – Demonstrates genuine care for employee wellbeing

How Much Does Group IP Cost?

Group IP is typically priced as a percentage of the covered payroll. Costs depend on the workforce demographics, benefit level, deferred period, and industry sector. As a rough guide:

For a 50-person company with an average salary of £40,000 and a 26-week deferred period, the annual cost might be £10,000–20,000 – or £200–400 per employee per year.

Tax Treatment

• Premiums: Tax-deductible business expense, not a benefit in kind for employees
• Payouts: Paid to the employer, who passes them on as salary. Subject to income tax and National Insurance (both employee and employer NI)

Added Value Services

Most group IP policies include valuable added services at no extra cost:

• Employee assistance programme (EAP) with confidential counselling
• Occupational health assessments and early intervention
• Return-to-work rehabilitation programmes
• Virtual GP services for employees
• Line manager training for managing sickness absence