11/10/10

By Claire West

•UK businesses are seeing a growing number of people cashing in employee benefits

•More than one in three (38%) companies has witnessed a growing trend for employees to sacrifice benefits, including financial protection benefits such as income protection or life insurance, for a cash lump sum

•36% of employees expect to be paid a full salary for a month at most, if for any time at all, if they were absent due to long-term sickness or injury

As employees struggle to boost their monthly income amidst a challenging economic environment that has seen salaries frozen and bonuses slashed, a growing number of UK workers are choosing to ignore the risk and give a short-term boost to their salaries by contracting out of their company’s employee benefits.

New research from Unum, a leading financial protection provider, reveals that more than one in three (38%) companies(3) has witnessed a growing trend over the past two years for employees to sacrifice employee benefits, including financial protection benefits such as income protection, life insurance or pension contributions, for a cash lump sum. Furthermore, almost one in five (18%) companies has witnessed an actual decrease in the amount employees are contributing into their pension schemes.

These emergency short-term measures, whilst providing a quick cash boost, could spell more serious long-term financial problems for many workers who are sacrificing financial protection. Such actions could not only jeopardise the quality of their retirement, but more importantly put them and their dependants in serious financial trouble in unforeseen circumstances, such as ill health, when they can’t earn a salary.

The need to take a long-term view and have adequate financial planning and protection in place is vital in light of findings that indicate that 36% of employees only expect to be paid their full salary for a month at most, and many for no time at all, if they were absent due to long-term sickness or injury. Such a sudden shortfall in salary would have a dramatic effect on many British workers, particularly the 33% who say they would “survive” less than a month on a weekly statutory sick pay of £79.15.

Unum’s research shows that almost half of all UK workers have been off work for more than a week due to illness or injury at some point in their career and approximately 2 million workers currently in employment have had to take off six months or more.

Marco Forato, Unum's Chief Marketing Officer, said: “We’re witnessing several concerning trends that would point to many employees currently taking a very short-term view of their financial situation. Although there’s no denying that a lot of people are struggling financially as a result of the recession, workers should only opt out of long-term financial benefits as a last resort. It is vital that employees instead seek to protect themselves and their dependants by having robust financial cover in place.”