New England small businesses house much of the region’s workforce. They make up its vast majority of companies, but they’re often stuck with fewer options — and higher costs — than larger organizations offering disability insurance to their employees.
In a competitive hiring market, ensuring employees get paid when they are away from work with an illness or injury can go a long way toward recruiting talent. Small businesses can attract better workers and keep their costs low by assessing their employees’(if this is meant to be plural) risk management needs, seeking out the right expertise, and encouraging plan adoption among workers.
The Disability Insurance Adoption Gap
Disabled individuals account for nearly 11 percent of the working-age population of New England, according to data from Cornell University. The U.S. Social Security Administration estimates that a quarter of current 20-year-olds will suffer a disability that prevents them from working for an extended period prior to retirement.
Those are staggering numbers, but surprisingly few employees plan for this scenario. Although roughly 70 percent of businesses offer the benefit, less than 40 percent of eligible workers actually carry disability insurance.
Increasing participation rates can help employers maintain a more stable workforce and save costs. Educating employees on risk management and the utility of planning for a disability is the first step toward encouraging plan adoption.
The Benefits of Short-Term Disability Insurance
When employees can’t work because of an illness or off-premises injury, short-term disability allows them to recoup a portion of their salary (usually 60 percent) while they cannot work. Conditions that cause brief absences — pregnancy, minor injuries, routine surgical procedures, viral infections — are common claims for short-term disability benefits.
Benefits kick in after a short elimination period (usually one or two weeks days) and usually pay out for three-to-six months. A per-month payment ceiling for short-term disability claims may also apply: $1,000 a week, for example.
The Benefits of Long-Term Disability Insurance
Worsening conditions such as heart disease, diabetes, cancer, neurological disorders and traumatic injuries keep employees off worksites even longer — months or even years. When short-term disability runs out, long-term disability continues coverage over a much broader timeline.
The elimination period for long-term disability is longer, anywhere from 90-180 days. After the waiting period elapses, benefits are based on a percentage of the employee’s salary, often less than that of short-term disability, and can last for months or years, even until retirement age.
Offering Disability Insurance at Your New England Small Business
A good disability insurance policy can be hard to find on the individual market, not to mention more expensive. For an employer, however, the costs are lower, between 0.2 and 0.3 percent of total compensation, according to 2013 statistics from the Society for Human Resource Management.
Small businesses looking for good disability policies can start by:
- Analyzing its needs and choosing what types of disability coverage would work best for its employees. For example, older employees tend to file more claims. Female staffers are 14 percent more likely to require short-term disability, while male employees are more likely to require long-term disability coverage at some point during their careers.
- Starting a relationship with a trusted HR management organization or workplace benefits advisor and discussing the company’s needs and options.
- Choosing how the benefit will be offered, whether fully or partially employer funded or offered to employees at a group rate.
Helping Employees — and Yourself — Handle the Issues That Can Accompany Disability (caution on using the term Hassle by the employer in this case)
Suffering a disabling condition poses a significant financial risk to employees. For those job seekers who know just how valuable it can be, adequate coverage can be a factor when considering whether to accept a new job or stay with a company. Offering it helps put small businesses on equal footing with larger companies.
Financial security isn’t something employees must give up to work at a smaller organization. As long as the right incentives are available, bigger isn’t always better.
If you found this article informative, may we suggest:
- For more on Motivational Theory in the Workplace read When Employee Perks Don’t Work, Try Rewards and Recognition.
- For more on Working Remotely, read Why Remote Work Thrives in Some Companies and Fails in Others.