The Benefit of Income Protection Benefits for New England Small Business

by | 27 Jun, 2017

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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’ 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.

RELATED: 7 Cost-Effective Ways Boston Businesses Can Increase Employee Retention

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:

  • Starting a relationship with a trusted HR management organization or workplace benefits advisor and discussing the company’s needs and options.

RELATED: New England Businesses That Partner with a PEO 50% Less Likely to Fail

  • 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.

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Tom DiSilva
Tom DiSilva has been providing professional human resource services for over 30 years. As the CEO of Navigate PEO, he actively partners with organizations of all sizes in the Greater New England area and across the country to help their businesses grow. He has expertise in HR and Labor Management, offering guidance and support for key areas of business such as negotiations, operations management, employee coaching, and employee benefits design. . He is an active member of The Society for Human Resource Management (SHRM), The National Association of Professional Employer Organizations (NAPEO), Professional Association of Co-Employers (PACE), and The American Payroll Association (APA). He is deeply committed to giving back to the community both personally and through Navigate Cares, which provides support for several nonprofit organizations such as the USO, The Boys & Girls Club, and the 3Point Foundation.

Continue reading helpful HR articles from Tom.

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Disclaimer: this article does not represent expert advice and is provided for informational purposes. Please get in touch if you would like expert HR advice.