Calculate group income protection costs and benefits. Compare income replacement rates, deferred periods, and employer National Insurance savings.
Group income protection (GIP) is an employer-paid insurance policy that pays a proportion of an employee's salary (typically 50–75%) if they are unable to work due to illness or injury. Payments begin after a deferred period (usually 1–12 months) and continue until the employee returns to work, reaches retirement age, or the policy expires.
No — group income protection premiums paid by the employer are not currently treated as a P11D benefit in kind for the employee. However, any benefits paid to the employee under the policy during incapacity are taxable as employment income (treated like salary) and subject to income tax and NI through PAYE.
HMRC limits group income protection benefits to 75% of an employee's pre-disability earnings (including employer pension contributions) minus the state benefit. In practice, most schemes provide 50–66.67% of salary. The maximum insured benefit is usually capped at £350,000–£500,000 per year by insurers.
This depends on the policy design. A long-term income protection policy pays until the employee returns to work or reaches the selected policy termination age (typically retirement at 65 or 67). A short-term policy (usually 2 or 5 years) is cheaper but limits the duration of payouts. Most employers choose 2-year or to-retirement options.
Indirectly yes — group income protection premiums are an employer expense but are not subject to employer Class 1 NI (unlike salary). This means providing GIP cover is typically more NI-efficient than paying equivalent sick pay as salary. The premiums are also fully deductible for corporation tax purposes.