Death-in-service Benefits
Provided either as part of the pension scheme or as a separate life assurance cover, this benefit provides for a multiple of salary to be paid to an employee's dependants should he or she die before retirement. The range of multiples of salary payable generally ranges from one to four times (currently the limit set by the Inland Revenue). Entitlements may be dependent on employee status or they may be the same for all employees in organizations with harmonized or single status benefit provisions. This is not a particularly expensive benefit to provide and is usually appreciated by employees because it saves on the personal life insurance cover needed to provide for their liabilities if they die prematurely and benefits can generally be paid free of income or inheritance tax.
This insurance cover provides for compensation should an employee be involved in an accident causing serious injury or death. It is a very common benefit, particularly where there is a great deal of travel involved or where the work can be hazardous for environmental and sometimes political reasons.
Also called long-term disability cover, this form of insurance provides for continued income once the provisions of the company sick pay scheme are exhausted. It is therefore used to provide security of income for those struck down with chronic or terminal illnesses, normally payable after the first six months of sick leave and continuing until death or retirement, when the employee's pension becomes payable. Cover can be provided either through a separate insurance or through the illhealth early retirement provisions in the pension scheme. The income provided under permanent health insurance schemes typically ranges from between one-half to two-thirds of salary at the time illness occurred, usually with some provision for escalating payments in relation to rises in the cost of living and a deduction to allow for state benefits. This benefit is not particularly expensive to provide as a percentage of payroll for a group of employees. It is certainly much cheaper than any cover available to individuals. The cost will vary in relation to the age profile of employees and any special health risks involved in employment. It is a much-appreciated benefit - the dependants of an employee with terminal cancer or multiple sclerosis can be saved from financial hardship by the scheme's payments. This is a common benefit for employees at all levels among major employers. Employees are only taxed on benefits which are paid and not on the insurance premiums paid by the employer.
Arguably a benefit, business travel insurance is normally provided as a matter of course for all employees who have to travel extensively on company business. The insurance cover may be more generous than that obtainable by individuals and it will be offered at advantageous rates.
Given the generosity of some provisions it is not surprising that benefits experts occasionally amuse themselves by working out how much an employee would be worth dead if he or she died in service (four times salary), in a plane crash (personal accident cover pays out in full), while travelling abroad on company business (business travel insurance pays out too), with an entitlement to dependants' pensions (typically due for the spouse and children under the age of 18).
There are two basic forms of medical insurance available in the UK:
1. schemes which cover the costs of private hospital treatment at rates which vary with the location and status of hospital selected by the employer (BUPA, PPP, WPA, etc);
2. schemes which pay out cash to those being treated under the National Health Service, eg Hospital Savings Association (HSA).
The former type of scheme may also pay out if the employee chooses to be treated under the National Health Service. Cover for private medical insurance may be taken out by employers either:
§ on a group discount basis, so that employees can obtain cover more cheaply for themselves and their families than they could as individuals; or
§ at no cost to employees. In this case free cover may only be extended to employees, with the possibility of covering families under group discount arrangements - or it may cover spouses and often dependent children too; or
§ somewhere in between the above.
Apart from the obvious comforts of private health care, the real benefit to employers of medical insurance is the freedom it provides for employees to be treated at times that suit their work commitments. For as long as the National Health Service has to run long waiting-lists for non-emergency surgery, then medical insurance is a desirable benefit. It can prevent months of performance below par. Private medical treatment also has connotations of status which can increase premium costs. If employees go for minor surgery in unforeseen numbers, partly at least to say they have received private treatment, such costs can escalate rapidly. Some organizations have had to resort to requiring employees to pay, for instance, the first £50 of any treatment costs to keep their schemes within reasonable limits. Medical insurance is an increasingly competitive market. Apart from the three main organizations providing private medical cover mentioned earlier, there is a growing number of other insurers competing for business. It is always worth negotiating with insurance companies and provident associations to see if they can come up with a more appealing quote - or getting brokers or advisers to do this for you.
Looking after employee health by providing screening can mean anything from providing for mass X-rays to screen for chest ailments, to cervical smears for female employees, to the full panoply of total health checks. Full screening is often provided for executives, especially for those over 40 or subject to particular stresses and hazards. At its most sophisticated, screening will look not just at an employee's current state of health but analyse his or her lifestyle and diet to provide advice on the prevention of future problems and the management of stress. Such screening may be far more appreciated than more expensive benefits, particularly if it picks up a health problem early and facilitates immediate treatment before the condition has got out of hand.
Although all employees are covered by statutory sick pay provisions, most major employers supplement these provisions by continuing sick pay for longer than the statutory period. Typically they provide for a given period at full pay and then a further period at half pay until the scheme's provisions are exhausted, sometimes after six months or more. Sick pay entitlements are generally service related. Entitlements may vary with status or be harmonized, depending on the employment philosophy prevailing in particular sectors. Generous sick pay provisions are usually much appreciated, but absenteeism often needs to be strictly monitored and controlled to prevent abuse of the system.
Although the statutory redundancy payments available in the UK provide some cushion for longer-serving employees losing their jobs, they are not very helpful to shorter service and indeed higher-paid employees made redundant through no fault of their own. Trade union agreements therefore frequently cover both redundancy policy and extra-statutory redundancy entitlements to provide additional job security or at least compensation for those covered by them. Many organizations too, faced with a redundancy arising from restructuring or change of business direction, are more generous with redundancy provisions. This normally takes one or more of the following forms:
§ extra notice compensation;
§ additional service-related payments - these vary considerably, two weeks per year of service being fairly common and one month per year of service not being uncommon, and many ignore the statutory weekly pay limit;
§ ex-gratia payments given as compensation for loss of office
Policy on redundancy is obviously influenced by what the organization can afford, but account should be taken of the fact that the relative generosity of treatment may well affect the morale of those whose jobs are safe. Redundancy exercises are very unsettling for everyone concerned. They need very careful planning and handling to ensure that the minimum disruption and hardship are caused.
When employees are told that they are to be made redundant, they should also be given precise details of the severance package. Preparing this is a major task for company pay specialists - one which often has to be performed in secret and at great speed. The information to be given to newly redundant employees typically comprises the following:
§ actual date of redundancy;
§ notice payments and additional notice payments due;
§ statutory and extra-statutory service-related redundancy payments;
§ any ex-gratia payments included in the package;
§ accrued pension rights and any augmented rights given on redundancy (eg early retirement provisions where it is technically possible to turn redundancy into compulsory or voluntary early retirement);
§ the position on other benefits, eg continued medical insurance or retention of the company car for a limited period to provide protection and continued mobility while a new job is found;
§ when and how payments of all kinds are to be made;
§ provisions to deal with special cases of hardship;
§ sources of information and advice both within the organization and outside.
The humanity and consideration shown for individuals when the package is explained can do much to ease their shock and sense of loss on being made redundant. This is always a situation that needs to be dealt with on a one-to-one basis and for which training in counselling skills is helpful.
It is probably worth emphasizing that redundancies should never be announced on Fridays - an early or mid-week breaking of the news provides time for advice to be given and for personal adjustment to the trauma before employees have to face the weekend, and often their social life, without any form of support.
One of the benefits which an increasing number of employers are offering to redundant employees is professional help in sorting out what it is they really want to do next and in showing how to apply effectively for the jobs they want. This service can be called outplacement, career counselling or one of a variety of other names dreamed up by the consultants who provide it. It can be given on a one-to-one basis for managerial staff leaving in mid/late career or as a series of lectures and advisory sessions for more junior employees. Good outplacement consultants or career counsellors have a high success rate in helping people replan their lives, build on their strengths and present themselves effectively to potential employers. The provision of career counselling does of course have wider spin-off benefits and a positive effect on the morale of those still in post in the organization who see their excolleagues learning to survive the trauma of redundancy.
As with any consultancy work, it is always wise to see several outplacement consultants or career counsellors, review their track record and see who provides the most appropriate service for the employees in question.
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