Death in Service: The best value staff benefit?

Many clients are interested in starting to offer staff benefits to their employees. This has been driven by Auto Enrolment (Workplace Pension) as employers are engaging with staff about a new benefit they are being introduced to.  Invariably, when we first meet a client, they have the desire to do something but they are unsure what to offer, what their staff would value, and what will be good value. 

When looking at staff benefits it is vital to consider the cost of the benefit compared with how much your staff will appreciate it. Providing an expensive benefit that nobody appreciates is a waste of time and money, no matter how well intentioned. 

Death in service is the most frequent benefit offered to staff by our clients. It makes sense, most employees will have a family, or a mortgage, or some loans, or a financial dependent, and as a result most employees have some need for life cover. 

So, it ticks the first box. (will it be appreciated)

What about cost? Anecdotally, death in service is cheaper than clients tend to expect. Here is an example of a recent case:

  • Staff: 12

  • Average salary: £49,792

  • Average age: 36.9

  • Benefit: 3 x salary (£149,376)

  • Location: London, N1

Annual total cost: £1,867.66

Annual cost per employee: £155.63

Monthly cost per employee: £12.97

£12.97 for these employees is the equivalent of a £7.52 per month net pay increase. 

In my view, it also ticks the second box. (is it good value for money)

There are few benefits that offer such a return to employees at such a low cost to employers.

I hope the above case study demonstrates how cost effective death in service can be. In this case we had carried out direct research with the employees of the company to establish which benefits the understood and which they wanted and would appreciate. Research of this nature is a great way to ensure that the benefits you establish have the desired impact. Furthermore, the consultation with staff reaffirms that you value their opinion. 

If you are considering offering your staff some benefits, please get in touch. We'd be delighted to help you build a benefits package that engages your people. 

There are important factors about death in service to remember. There are two types of policy:

1) A registered policy.

2) An excepted policy.

To a large extent the two policy types fulfilled the same service. A fundamental difference is that a payout from a registered policy will count towards the deceased pension lifetime allowance (currently £1,000,000). If you breach the allowance it can lead to a tax being levied.  Whereas an excepted policy does not. It is important you seek advice when establishing a policy to ensure it is setup correctly so that it doesn't lead to an unintended tax bill in the future. 

Duncan Farrar