There are currently 3.1m people in the UK who have been on benefits for over a year. The Government's Welfare Reform Act (the Act), which came into effect on 27 October 2008, aims to reduce the number of people claiming state benefits and also increase employment levels, by helping sick and disabled employees back to work.
The Government has accepted that its current spending on long-term sickness benefits is unsustainable. Consequently, it is calling upon employers to invest in the health and wellbeing of their employees and to adopt procedures to rehabilitate sick or disabled employees.
To assist in meeting these aims, a new Employment and Support Allowance will replace the current Incapacity Benefit. The amount of benefit paid will vary depending on how the claimant is assessed, with the emphasis being more on capability rather than actual disability – as is currently the case.
However, as a result of the Act, benefits will be harder to claim and, in many instances, be lower in value.
So how does an employer make sure that it honours its responsibilities, bearing in mind that the Act seems to shift the cost of an employee's prolonged absence from the state to the employer?
Traditionally, many employers have underwritten their liability for funding long-term sick pay with an insurance-based group income protection arrangement.
These arrangements are designed to provide a replacement income if illness or injury prevent employees from working for a long period of time.
The insurance benefit becomes payable when the member has been ill for a while. Benefits become payable after the end of that waiting period, i.e. the deferred period. Typically, this will be about six months, but longer or shorter periods are available.
The insurance-based element of these schemes is of great benefit to the employer as it provides a known premium cost, compared to the unknown cost of self funding long-term sick pay. Furthermore, the schemes offer additional and valuable support.
Insurers will offer rehabilitation services including occupational therapy, psychology, nursing, counselling and disability management. The medical professionals would typically meet with the employer and the claimant in order to formulate a 'return to work' programme. If necessary, they can assist with preparing the workplace for a return to work and provide information on any necessary adjustments.
Many schemes also offer employee assistance plans at no extra cost which provide telephone and, in some instances, face-to-face counselling for employees with stress, legal, medical or financial issues.
The Welfare Reform Act should be seen as an opportunity for employers to review their strategy in dealing with staff absence, health and wellbeing; our team of employee benefits specialists are able to advise and assist with the process.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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