As an employer what should you consider in order to ensure that your employee benefits are appropriate and meet current legislation? Dion Prideaux-Reynolds gives us the key questions you need to be asking.
Often in small to medium-sized businesses employee benefits such as group life, group income protection, private medical and pensions are not regularly reviewed. Some employers will have a number of different schemes with varying terms, which may have been inherited due to business acquisitions or Tupe transfers.
Employee benefits should be regularly reviewed and some of the questions you should ask are:
- Is the holding insurer still an appropriate choice with suitable contract terms?
- Can additional free benefits be secured from other providers? Some providers offer free employee assistance programmes, bereavement counselling services or information and advice for people who have been diagnosed with a serious medical conditions.
- Are premiums still competitive, or do you have high charge pension arrangements with unsuitable default investment funds?
- Are the eligibility and contract terms still appropriate for your business and employees? For example, where schemes are linked to pension plan membership and an employee does not join the pension scheme when first eligible but joins later, the insurer may class them as a discretionary entrant. Where this is overlooked the employee may be uninsured and the liability for payment of the benefits fall to the employer, which can be costly. Linking benefits to pension scheme membership also has issues when you reach your staging date for automatic enrolment under the new pension legislation.
- Will the existing group risk insurances be suitable after auto-enrolment? With a sudden and potentially large influx of new members who have been auto enrolled into the pension scheme will the holding insurer review the premium rate?
- Do your schemes have outdated or complex eligibility criteria, which are no longer relevant?
- Are your group risk benefits set up with the adviser receiving commission? Is it at the normal market rate or a higher percentage and is it appropriate for the level of advice and work undertaken? Has another alternative remuneration basis been considered, such as fees? Moving from commission to fees could make significant cost savings for an employer.
- Do schemes meet age discrimination and equality legislative requirements? Are they up to date for changes to pension legislation, and the removal of the default retirement age and earnings cap?
- Finally, when did you last review and update your contracts of employment? Employment contracts should reflect the benefits that you currently offer and worded correctly. For example, if a contract specifies a level of benefit payable on death, such as four times basic salary but the member is restricted to the free cover limit because they have not provided the required medical evidence you, as the employer, may have a liability for the uninsured element.
Regular benefit audits ensure that your arrangements:
- Meet your objectives and needs
- Are legally compliant
- Are up to date, competitive and cost effective
- Are simplified by merging legacy arrangements
- Relevant to your employees
- Valued by your employees and their families
Employers should regularly review their benefits, providers and contract terms to ensure that they are still appropriate. Find an adviser who specialises in small businesses.