Employers should think “very carefully” before cancelling or lapsing their employee benefits offerings during the coronavirus crisis, a leading consultancy has said.
As benefits renewal dates come around just as the current crisis is expected to peak, Steve Herbert of Howden Employee Benefits & Wellbeing said that cutting back on benefits might seem like a sensible option for cash-strapped employers who have been forced to close down usual operations.
Herbert (pictured), who is Head of Benefits Strategy at the consultancy, said: “We completely understand that employers are facing a uniquely challenging cash-flow situation at present, and that accordingly many organisations are looking to reduce costs during this very difficult period.
“But we are very concerned that those employers who look to reduce some of their employee benefits spending for the duration of the crisis might not be fully aware of the pitfalls of doing so.”
Herbert said that he is particularly worried by that employers might inadvertently damage employee relations and productivity, while also weakening the benefits offering and its appeal in the longer-term too.
Cutting back on benefits could also mean that businesses are, in effect, self-insuring, leaving them open to potentially catastrophic costs.
Herbert outlined three “crucially important” factors that employers should carefully consider and understand before ceasing to provide any part of their benefits package:
Legal duty and self-insurance risk
Employers should always check carefully before cancelling any element of their benefits package. The cover provided under schemes such as group life and group income protection are sometimes contractual benefits, so cancelling such policies might well leave the employer effectively self-insuring significant employee risks at a time of great uncertainty.
Breaking cover & underwriting concerns
Ceasing to provide cover might seem like a simple and short-term cost saving decision for the duration of the coronavirus pandemic. Yet employers might well overlook that some of their employees – and in particular their organisation’s highest earners – may have already undertaken a medical underwriting process to be insured for their full benefits under those schemes. Any break in insurance cover during the current crisis might result in the underwriting process starting again, with no guarantees that the previously provided level of benefit will be available under a new policy.
Herbert said that those employees already receiving medical treatment under a group private medical insurance scheme will probably have their treatment schedule interrupted, and in extreme cases might not be able to continue that treatment under a new policy in the future.
Herbert said he is is also concerned about the wider implications of a break in cover for entire schemes rather than just individual members. As a direct result of Covid19, it is possible that additional terms and/or restrictions may be imposed on certain insurance contracts going forward.
Valuable additional services
Herbert said that it is important to highlight that employers and their employees also often have access to a range of valuable support services provided alongside the benefits mentioned earlier.
Some of the more popular and widely used free tools include remote-GP appointments, employee assistance plans, mental health support, and a range of counselling lines and web-based applications.
Herbert said: “We believe that cancelling any benefit could well be a short-term decision that employers and employees might later deeply regret.
“Aside from all the issues already mentioned, we would like to point out the potential damage that such a decision could have on worker morale, employee engagement, and ultimately company productivity too.”
“UK employers will need to bounce back quickly once the crisis has ended, so few organisations will want to damage these really important measures.
“Far from reducing the benefits on offer, we would suggest that employers need to better promote their existing offerings to provide as much support as possible to workers and their families at this very challenging time.”