HR Directors must act now if they are to protect employees from upcoming changes to State Disability Benefits. That’s according to Paul Avis, Marketing Director of Canada Life Group, who warns that changes announced by George Osborne this summer could see staff assessed as unfit to work receive just £3,801 a year. From 6th April 2017, any applicants for Employment and Support Allowance (ESA) who are assessed as unfit for work (but capable of work related activity), will receive a lower level of state benefits, equivalent to Job Seekers Allowance, the benefit that follows Statutory Sick Pay when an employee is absent for over 28 weeks. Avis explains how the changes could affect staff: “For anyone who has never considered what would happen to them, and their colleagues, when they are sick this is another wake up call. Around 250,000 people leave employment each year due to ill health. With a welfare bill estimated at £36billion, it has been estimated this simple reduction in the ESA benefit amount payable will save £100million in year one for the Government, rising to £640million in 2020-21.” Avis warns that even organisations with Group Income Protection (GIP) could be caught out. “For the 17,119 organisations (covering 2.08million employees) which have had the foresight to have GIP schemes in place, there are impacts too. A 30% cut in this state benefit means that, if an organisation has a GIP scheme with a ‘state deductible,’ they will have to pay more, as the benefit that insurers pay, during a claim, has increased. “We estimate that around 50% of our GIP schemes have a state deductible scheme design and, if this is representative of the whole market, this could affect 9,000 organisations, and around 1million employees.” Avis adds that due to implementation time, employers must act now to protect their staff. “As the industry tends to offer two year rate guarantees, this already has an impact on any claimants after April 2017. In effect, some insurers are already under-charging, as they will have to make up the shortfall between the current state benefit and the new amounts. “And for those that do not have GIP, it is another hole in the argument that the ‘State will provide.’ It never really did, and in the future it will provide even less. So perhaps GIP is the next thing HR Directors should be considering, both for themselves as much as for their employees. “And therein lies the issue: failure to consider the way that people who are long-term absent are treated is no longer an option. Can anyone really live on £3,801 per annum, and does this provide a moral conundrum when a request for state benefits is declined? “If you have GIP, which includes a ‘deductible state benefit,’ the benefit design should be reviewed, otherwise retention could lead to further consultation exercises and prices increases as the State system is refined further.