Category: Group income protection · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed 2026-06-10
The group income protection benefit is the monthly payment made by the insurer to the policyholder employer for an absent employee who satisfies the policy definition of incapacity. The benefit is calculated as a defined percentage of the employee’s pre-incapacity earnings, less any offset for state benefits and (optionally) for other income, subject to a scheme maximum.
Category: Group income protection Also known as: GIP benefit, disability income benefit Typical level: 50–75% of pre-incapacity earnings Related concepts: Deferred period group IP, Group IP definitions, Group IP benefit ceasing
The benefit is paid monthly to the employer who passes the amount through PAYE to the employee as if it were continuing salary. Many schemes also include cover for the employer’s National Insurance contributions and pension contributions during the absence, so that the employer can continue making them without itself bearing the cost. The benefit continues until the earliest of return to work, retirement, death or expiry of the scheme’s payment term.
The benefit is taxable as earnings on the employee under ITEPA 2003 because it is paid by the employer through PAYE. The employer can deduct the wage paid to the absent employee for corporation tax purposes; the insurance benefit received by the employer is a trading receipt. State benefits commonly offset include Employment and Support Allowance and incapacity-related Universal Credit. Some schemes do not offset state benefits.
A typical benefit might be 60% of pre-incapacity gross earnings less the standard rate of Employment and Support Allowance. Benefit may be index-linked (typically by RPI or CPI capped at 5%) to protect the employee against erosion during long-term claims. Limited-payment-term cover (e.g. 5 years of benefit) is a lower-cost option that has become more common in recent years.
An employee earning £60,000 (£5,000 gross monthly) is signed off with a defined incapacity. After the 26-week deferred period, the insurer begins paying the employer 60% × £5,000 = £3,000 monthly, less the relevant ESA offset. The employer passes the payment to the employee through PAYE. The benefit continues for as long as the employee remains incapacitated, up to the scheme’s terminal age.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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