An executive income protection plan is a specific form of insurance that a business can take out to payout when an employee is off sick or injured, allowing you to cover the costs of their salary, Bonuses/ Overtime, P11D benefits, Dividends, as well as their pension contributions and National Insurance payments. More and more businesses are offering enhanced sick pay as an employee benefit and incentive. Executive income protection provides a way to ensure this benefit doesn’t add additional, unexpected costs to your business.

Typically, executive income protection will cover up to 80% of the earnings of an employee. This protection dramatically reduces your overall financial costs if you need to claim, protecting your business and your employee in the process. 

The goal of taking out executive income protection is twofold. Firstly, protecting the business by reducing the impact and financial burden of an incapacitated employee. For smaller companies, a single executive’s inability to work can have a significant directly impact on income. If you need to hire a temporary employee in the meantime, this can mean even higher costs.

Secondly, executive income protection helps support employees when they need to take time off due to illness or injury. If your business provides sick pay or you choose to continue to give that employee’s full salary, executive income protection is the safety net you need.

If you want to learn more about executive income protection, our team at WIS are here to help. Book a meeting with us to discuss how we can help you.

The most significant benefit of an executive income protection policy to an employer are the tax savings. As the premiums are not treated as a P11D expense, there are no Benefit-in-Kind implications. Both the employee and employer will not have to pay National Insurance Contributions for this insurance policy. 

However, when the employee receives his sick pay from the employer, his normal tax treatment will still be applicable. This is based on our understanding of current legislation and HMRC practice, which can change. 

Executive income protection is a viable option for small to medium-sized businesses that require protection for executive staff to ensure sick pay doesn’t result in a financial burden on their business. If you are a business looking to extend sick leave or already have a sick leave policy that you’d like additional protection for, executive income protection may be a good fit for you.

It is important to note that your executive employees will need to meet specific eligibility requirements for executive income protection. As such, you will need to get coverage on a case-by-case basis. While the requirements may vary, many insurance services will need proof of UK residency. They may also require evidence that an individual employee has dependants and no access to funds from other sources. In the same way as a Relevant Life policy, the business needs to be a separate legal entity to the person wanting to be insured. As a result, sole traders and most self-employed people are not eligible.

There are benefits to getting coverage through an executive income protection plan for both employees and employers. For businesses, the most significant benefit is reduced tax implications and peace of mind that they won’t have to cover the total cost of sick leave where full sick pay has been introduced. As an attractive benefit, executive income protection is also a good hook for hiring and retaining employees.

For employees, executive income protection is a significant step up from Statutory Sick Pay arrangements that most firms make use of, current S.S.P payments are just under £100 a week. This compared to receiving up to 80% of your normal income from your employer can be vital to help you through your recovery. You are also able to insure up to 80% of the employee’s spouse or civil partner as long as those dividend payments stop when the employee insured is off work due to illness or injury. 

A personal income protection plan offers the same type of benefit as an Executive Income Protection plan; however, it can only cover up to 60% of your income.

Does executive income protection sound like the right choice for your business needs? If you like the idea of having an extra layer of protection on your sick pay policy, our team at WIS are here to help you find the best deal for your business needs. Our highly skilled team has extensive knowledge of the industry, and we’re perfectly placed to pair you with the ideal plan for your ultimate needs and goals.

Or, if you want to chat about the options available to you, our friendly team are on the other end of the phone. Give us a call or fill out our contact form for an appointment, and we’ll ensure you are at the top of the priority list. Why not get in touch today to find out how we can help you choose the best executive income protection for your business?