Group income protection (GIP) is an employer-funded policy that pays an employee typically 50–75% of salary if long-term illness or injury stops them working, usually after a waiting period of 13–26 weeks. It generally costs around 0.25–1% of payroll, premiums are normally tax-deductible, and most policies bundle rehabilitation and early-intervention support.
- ✓GIP typically replaces 50–75% of salary during long-term absence — SSP is roughly £120 a week.
- ✓Premiums generally run at 0.25–1% of payroll, and are normally deductible for corporation tax.
- ✓Mental ill health accounts for 41% of long-term absence; GIP rehab services target exactly that.
What group income protection is
Group income protection is an insurance policy a company takes out on its employees' incomes. If someone is too ill or injured to work beyond a chosen waiting period — the 'deferred period', typically 13, 26 or 52 weeks — the insurer pays a benefit, usually 50–75% of salary, which the employer passes on through payroll. Payments generally continue until the employee recovers and returns, reaches a set limit (some policies cap payment at two or five years), or hits retirement age.
It answers a question most employers only face when it's too late: what do we actually do when a valued employee is signed off for six months? Statutory sick pay is around £120 a week and runs out after 28 weeks. Without a policy, you're choosing between funding full pay indefinitely from your own cash flow or watching a loyal employee's income collapse while they're seriously ill.
What it costs — and what moves the price
GIP is priced as a percentage of the payroll you're covering, and for most schemes it lands between 0.25% and 1%. Where you sit in that range depends on your team's ages, occupations, the benefit level, how long payments can run, and the deferred period you choose.
| Design choice | Cheaper end | More expensive end |
|---|---|---|
| Benefit level | 50% of salary | 75% of salary |
| Deferred period | 26 or 52 weeks | 13 weeks |
| Payment duration | Limited term (2–5 years) | To retirement age |
| Workforce | Office-based, younger | Manual, older |
A common small-company design — 50–60% of salary, 26-week deferred period, five-year limited payment term — keeps costs towards the bottom of the range while still covering the scenarios that genuinely threaten household finances. Aligning the deferred period with your existing sick pay policy (so company sick pay hands over to the insurer) avoids paying for weeks you'd have covered anyway.
The part employers underrate: rehab and early intervention
The payout is only half the product. Group income protection insurers have a direct financial interest in getting your employee better and back to work — so most policies include vocational rehabilitation and early-intervention services at no extra cost. That typically means access to case managers, physiotherapy and mental health support that kicks in during the deferred period, often from the first weeks of absence, before any claim is paid.
This matters because mental ill health accounts for 41% of long-term absence, and musculoskeletal problems make up much of the rest — both respond well to early, structured support. Many insurers also bundle an employee assistance programme (EAP) covering the whole workforce: confidential counselling, legal and financial helplines, and manager support lines, whether or not anyone ever claims.
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GIP vs statutory sick pay: the gap it fills
The state safety net does less than most people assume. Statutory sick pay is roughly £120 a week — under £6,300 a year — and stops entirely after 28 weeks. For an employee on £35,000, that's a drop of over 80% in income at the exact moment they're facing a serious illness. UK employees average 9.4 sick days a year, and while most absences are short, the long ones are the ones that break household finances and cost employers most of the ~£103bn annual absence bill.
- Weeks 1–28. SSP pays around £120/week; many employers top up with company sick pay for a limited period.
- Week 28 onwards. SSP ends. Without GIP, the employee is down to state benefits; with it, 50–75% of salary continues.
- Throughout. GIP rehab and case management work on the return to work — something SSP does nothing to help with.
Setting up a scheme
Group income protection schemes typically start from two or three employees, and most small groups are set up on a 'free cover limit' basis: everyone is covered up to a generous salary threshold with no medical questions at all, and only very high earners above the limit need individual underwriting. Setup usually takes one to two weeks.
The design decisions — benefit level, deferred period, payment duration, which employees are eligible — make bigger price differences than the choice of insurer, so it's worth comparing a few designs side by side. We compare group income protection alongside company health insurance and group life cover, so you can see what a full benefits package costs before committing to any of it.
Frequently asked questions
What percentage of salary does group income protection pay?
Typically 50–75% of gross salary, with 50–60% the most common design. The benefit is deliberately less than full pay because it's taxed through PAYE when paid, and because insurers want a financial incentive for recovery — after tax, a 60–75% benefit usually lands close to normal take-home pay.
How much does group income protection cost an employer?
Generally around 0.25–1% of the payroll being covered. A young office-based team with a 26-week deferred period and limited payment term sits at the bottom of the range; older or manual workforces with cover to retirement age sit at the top. Quotes are per-scheme, so comparing designs matters.
Is group income protection a taxable benefit for employees?
Not normally. Employer-paid group income protection premiums are generally not a P11D benefit in kind, so employees usually pay no tax on the cover itself. Tax only arises if a claim is paid: the benefit goes through payroll and is subject to income tax and National Insurance like salary.
Are group income protection premiums tax deductible for the company?
Generally yes — premiums for a standard employer-paid scheme are normally an allowable business expense for corporation tax, because the policy protects the business's obligation to pay staff. Treatment can vary with unusual scheme structures, so confirm with your accountant before relying on it.
What is the deferred period on group income protection?
The waiting period between an employee going off sick and the benefit starting — typically 13, 26 or 52 weeks. Longer deferred periods mean cheaper premiums. Most employers align it with their company sick pay, so their own sick pay covers the early weeks and the insurer takes over afterwards.
How long does group income protection pay out for?
It depends on the design. Full-term policies pay until the employee returns to work, dies, or reaches the scheme's retirement age. Limited-term policies cap each claim at, say, two or five years, which meaningfully reduces premiums. Payments always stop once the employee is well enough to return under the policy's definition.
Does group income protection cover mental health absence?
Yes — mental ill health is one of the most common causes of group income protection claims, reflecting its 41% share of long-term absence. Policies pay when a covered employee meets the definition of incapacity regardless of cause, and most insurers provide early psychological support during the deferred period to aid recovery.
Do employees need medicals to join a group income protection scheme?
Usually not. Most schemes operate a free cover limit: every eligible employee is covered automatically up to a set benefit level with no medical questions. Only high earners whose benefit would exceed that limit typically face individual underwriting, which keeps admin light even for small companies.
What's the difference between group income protection and health insurance?
Health insurance funds private treatment to shorten an illness; group income protection replaces salary when illness keeps someone off work long-term anyway. One pays hospitals, the other pays people. Many employers eventually run both — our guide to choosing between them covers which to buy first.
Can a small company get group income protection?
Yes. Schemes typically start from two or three employees, and small groups get the same free-cover-limit underwriting as large ones. At roughly 0.25–1% of payroll, a five-person company with £200,000 of salaries might pay in the region of £500–£2,000 a year, depending on design.