Long-Term Sick: A Serious Fiscal Threat
In any company, especially small businesses, temporary or long-term absenteeism and the subsequent loss of skills often increases the workloads on other team members and reduces productivity. This isn’t just bad for the business, it’s bad for the economy too.
According to the Office for National Statistics, 2.5 million UK employees were considered economically inactive due to long-term sickness in the first 3 months of 2023. Essentially 1 in every 13 workers is long-term sick, a figure which has increased by 31% since the 2019 pandemic. This trend can be attributed to various factors such as stress, anxiety, depression, and contagious illnesses like flu and COVID-19.
As reported by The Independent, a recent study by the Institute for Public Policy Research said that the issue represents a “serious fiscal threat” and warned “there is no road to prosperity for this nation without tackling the tide of sickness head-on”.
Commenting on the study, Lord James Bethell, former health minister and commissioner, said: “Sick Britain is costing us our lives, our livelihoods and harming the UK economy. If we want to change course, we must stop pretending that the answers are always more hospitals and more acute staff.”
More recently, HR News reported that long-term sick cost UK businesses an estimated £21 billion in the period from July 2022 – August 2023.
How can Private Medical Insurance for Businesses Help?
Increasingly, business owners recognise the vital role healthy and content staff play in driving business success. Helping to safeguard your employees’ physical and mental well-being is not just a social responsibility, it makes good business sense too.
As a highly valued employee benefit, Private Medical Insurance helps to improve your team’s health and overall well-being. It can also help to increase staff retention rates, attract new recruits and boost morale. However, from a wider perspective, perhaps the greatest benefit is its ability to reduce unnecessary absenteeism.
Implementing a group business policy means employees receive medical consultations and treatments without having to experience the longer waiting times on the NHS. And getting staff back on their feet with the assistance of private medical insurance isn’t just good for the employee and your business, its good for the economy and also helps reduce the strain on the NHS.
But with current tax laws, many business owners still perceive private medical insurance as an additional cost instead of an investment.
So, given the positives for UK Plc, is the government doing enough to encourage more businesses to provide private medical insurance to their employees?
Spring Budget 2023
In the spring budget earlier this year, Jeremy Hunt, the Chancellor of the Exchequer, ignored calls from the insurance industry to reform Insurance Premium Tax (IPT) and the employee benefit tax.
IPT is currently 12% whilst the employee benefit tax currently administered through P11Ds and is argued to be discouraging some employees from taking up cover.
However, whether IPT is a barrier is somewhat debatable. Insurance companies have seen a notable rise in private and corporate health insurance policies in the past year. Aviva, one of the leading insurers in the UK, has reported gaining an additional 170,000 new health insurance members in the past year.
Whilst no moves were made in the Spring Budget to reform the taxation on private health, in July the government published a Consultation on Tax Incentives for Occupational Health. This sets out to explore the case for providing tax incentives aimed at encouraging more employers to supply medical benefits to their employees.
We look forward to working collaboratively with stakeholders to determine whether, as part of a package of policies on occupational health, there is a case for providing further support to employers through the tax system or through alternative tax incentives, and the impact of such incentives on different groups of businesses.
This consultation discusses the case for tax incentives and specifically seeks views on providing further support through expanding the Benefit in Kind exemption for medical benefits, to encourage greater employer provision of occupational health services.Jeremy Hunt, Chancellor of the Exchequer
Super-Deduction Tax Relief
The Telegraph have subsequently reported that the Chancellor is considering introducing a “super-deduction” in the upcoming Autumn statement. The article suggests that the move may even see some businesses rewarded with over 100 per cent tax relief on certain types of healthcare together with reforms to ensure employees are not taxed for receiving healthcare benefits.
Simply put, the opportunity for companies to reduce their corporation tax bill by providing private healthcare would create something of a no-brainer.
If this does indeed transpire, it would arguably be the largest viable tax incentive the government could offer businesses to provide private health insurance to their employees.
For the time being we will have to wait until the Chancellor’s Autumn statement on November 22nd to find out what, if indeed any tax reforms may be put in place.
However the case in favour is incredibly strong. Reducing the number of economically inactive and long-term sick is absolutely paramount for the economy. If this can be done in such a way that it also alleviates the strain on the NHS without detriment to those that rely on its services, then surely the only remaining argument to oppose such a move is one of affordability for UK plc.
We will let the economists grapple with the question of affordability although with a general election looming in 2024, the Chancellor has a limited time-frame to act.