Income Protection at Work: Growing Employee Demand, Falling Short on Provision

Only 24% of UK employers offer income protection as a workplace benefit. Given how quickly an employee’s finances can unravel after a few months off sick, that figure is harder to justify than it might first appear.

Research published by Arthur J. Gallagher & Co. shows that employee appetite for income protection increases considerably across a working life. Among workers aged 20 to 29, just 4% rate it as a preferred benefit. By ages 50 to 59, that rises to 12%. Both numbers are low, and it would be wrong to read this as evidence of strong demand. What the trend does suggest is that as people accumulate mortgages, dependants and financial commitments, income protection starts to feel relevant in a way it simply didn’t at 24. The problem is that by the time employees recognise the need, they may have spent years without cover they could have had.

The employer provision gap is the more pressing problem. Three quarters of UK employers are leaving their workforce exposed to a risk that most employees are poorly equipped to absorb on their own.

What Is Group Income Protection?

Income protection is insurance that pays a proportion of an employee’s salary if they can’t work because of illness or injury. When an employer arranges this for their workforce, it’s referred to as group income protection (GIP).

The employer takes out and funds the group income protection policy. If an insured employee becomes unable to work for an extended period, the insurer pays a monthly benefit to the employer after a waiting period, typically 13, 26 or 52 weeks, which the employer then passes on to the employee through payroll. Cover is usually set at between 50% and 75% of gross salary, though some insurers will go up to 80%. Payments continue until the employee returns to work, until a fixed term ends (commonly two to five years), or in some cases until State Pension Age.

Most policies also give employees access to rehabilitation support and early intervention services well before any financial benefit becomes payable. Insurers actively encourage employers to report potential claims early, sometimes within the first few weeks of absence, so that mental health support, physiotherapy and case management can begin promptly. This often reduces the length of absence as much as the income replacement itself.

On the cost side, employer premiums for group income protection are generally deductible against corporation tax and are not treated as a benefit in kind for employees. That makes it a more cost-efficient benefit to provide than many employers realise.

Why So Many Employees Don’t See It Coming

Younger employees tend to want things they can use now: flexible working, extra holidays, gym memberships. Long-term illness feels abstract at 27 in a way it doesn’t at 52. That’s understandable. It’s also the reason so many people arrive at their forties and fifties with no protection in place and no real sense of what that means.

There’s also a tendency to assume that if the worst happened, the state would step in. For most UK employees, that assumption doesn’t hold up once you look at the actual numbers.

What Statutory Sick Pay Actually Pays

Statutory Sick Pay (SSP) is the legal minimum UK employers must pay to employees who are off sick. Following changes under the Employment Rights Act 2025, SSP is now paid from the first day of absence, an improvement on the previous rules where the first three days went unpaid. The current weekly rate is £123.25, and it’s payable for up to 28 weeks.

Put that in context: £123.25 per week is around 18% of average UK weekly earnings. For anyone with rent, a mortgage or regular household bills, it covers very little. After 28 weeks it stops altogether, at which point employees who still can’t work are left to navigate Universal Credit and other means-tested benefits.

The Employment Rights Act 2025 reforms are a genuine improvement, particularly for lower-paid workers who previously didn’t qualify for SSP at all. But they don’t alter the core issue. The flat rate is too low to protect most employees from financial hardship during a serious or prolonged illness, and 28 weeks passes quickly when you’re dealing with something like cancer, a significant mental health crisis or a major musculoskeletal injury.

How Group Income Protection Compares

The difference in practical terms is considerable.

SSP pays £123.25 per week, roughly £535 per month. A group income protection policy covering 60% of salary for an employee earning £35,000 per year would pay around £1,750 per month. That’s the difference between managing and not managing for most households. Some policies are set at 50%, others at 75%, and according to Aviva, employer premiums typically run between 0.25% and 1.5% of employees’ gross salaries, depending on workforce age, industry, the level of cover chosen and the length of the deferred period. The longer the waiting period before benefits kick in, the lower the premium.

For an SME weighing up whether this is affordable, it’s worth running the actual numbers rather than assuming it’s out of reach. The per-head cost is often lower than employers expect, and the corporation tax treatment improves the net position further.

The Awareness Problem Employers Need to Solve

Even employers who do provide group income protection often find their employees don’t fully understand it, or don’t appreciate it when they’re choosing between benefits. Protection products tend to get overlooked in favour of things that feel more immediate.

This is where financial education does its most useful work. An employee who understands that SSP pays £123 per week, and that their employer’s income protection policy would pay 60% of their salary instead, is far more likely to value that benefit. The numbers tell the story; they just need to be explained clearly.

The Gallagher research suggests that demand for income protection grows as employees get older, but the need for it exists long before most people recognise it. A 35-year-old with a mortgage and two children has just as much reason to want income protection as a 55-year-old, but probably hasn’t thought about it. Good financial education, delivered at the right moments in someone’s working life, can shift that.

For UK employers, the practical question is not whether financial wellbeing matters. It clearly does, and employees increasingly expect their employer to take it seriously. The question is how to communicate it in a way that employees actually engage with.

Aspina provides financial wellbeing e-learning resources for UK employers, covering income protection, workplace pensions and related topics. Resources are currently in development.