TL;DR: Group income protection (GIP) is an insurance policy taken out by an employer to provide continuing income to an employee who is unable to work for a long period because of illness or injury. The benefit typically replaces 50 to 75 percent of the employee's salary after a deferred period (commonly 13, 26 or 52 weeks of absence), and pays until the employee returns to work, reaches a defined cessation age, or no longer meets the policy definition of incapacity. GIP is paid for by the employer, often forms part of a wider employee benefits package, and is taxed as employment income when the employee receives the benefit. Most GIP policies also include rehabilitation support, return-to-work services and employee assistance programmes alongside the cash benefit.
Last reviewed May 2026
Group income protection sits in the workplace benefits space alongside group life assurance, group critical illness and private medical insurance. The product covers the financial risk that an employee is off work for a long period because of illness or injury and the employer's statutory sick pay obligations have run out. UK statutory sick pay is paid for up to 28 weeks at a relatively small weekly amount, and many employees rely on a workplace income protection scheme (or a personal policy) for income beyond that.
This guide explains exactly how UK GIP works in 2026, what is typically covered, the deferred period and benefit period choices, the tax treatment for both employer and employee, the claims experience, and the differences between GIP and individual income protection that employees take out themselves.
What group income protection actually covers
A GIP policy covers an employee for a defined level of replacement income if they are unable to work due to illness or injury for longer than a deferred period. The definition of "unable to work" varies between policies. Stronger definitions cover an employee who cannot perform their own occupation; weaker definitions cover only an employee who cannot perform any occupation. The policy schedule states the definition used and how it applies after the first 12 or 24 months of claim (some policies use a stricter definition after the early years).
The benefit level is typically 50 to 75 percent of the employee's pre-incapacity salary, and most policies offset the benefit against state benefits the employee is also entitled to (Employment and Support Allowance, Universal Credit, Statutory Sick Pay). The net benefit paid by the insurer is the gross policy benefit less any state benefit offset.
The deferred period is the time the employee must be off sick before the benefit starts. Common deferred periods are 13 weeks, 26 weeks and 52 weeks. Longer deferred periods reduce the premium (because the policy pays less often and for shorter spells). The employer's own sick pay arrangements typically cover the deferred period before the GIP benefit starts.
Benefit period and limited-payment policies
The benefit period is the maximum length of time the GIP policy will pay benefit on a single claim. Two structures dominate. A full-term policy pays until the employee returns to work, reaches the policy cessation age (often the state pension age or the scheme's stated normal retirement age), or no longer meets the incapacity definition. A limited-payment policy pays for a maximum of two or five years on a single claim, after which the benefit stops even if the employee remains incapacitated.
Limited-payment policies are cheaper but provide a much smaller financial safety net. They are sometimes used as a cost-effective entry point for smaller employers, with the option of switching to a full-term structure later. Full-term policies are the structure most often used by larger employers and by employers seeking to differentiate their benefits package.
The cessation age is the latest age at which the policy will pay benefit. Modern policies typically use state pension age (currently 66 for both men and women, scheduled to rise) as the cessation age. The employer's pension scheme normal retirement age is sometimes used as a complementary anchor.
Tax treatment
The employer's GIP premium is normally an allowable business expense for corporation tax purposes (HMRC accepts that the premium is paid for the purposes of the trade), and the premium is not normally treated as a taxable benefit on the employee (because the benefit, when paid, is taxed as employment income in the employee's hands). The combined effect is that the premium does not produce a tax charge on the employee at the point of payment.
When a GIP benefit is paid out, the employer typically receives the money from the insurer and pays it to the employee through payroll. The benefit is treated as employment income, taxed under PAYE in the normal way, and subject to employee National Insurance and (where the employer remains liable) employer National Insurance. The net amount the employee receives is therefore the post-tax equivalent of the gross benefit level.
In some structures, the policy is held in trust and the insurer pays the benefit directly to the employee. The tax treatment varies depending on the structure; the policy documentation and the employer's HR or benefits team should be checked for the specific arrangement.
Rehabilitation, EAP and the value beyond the cash benefit
A modern GIP policy is more than an income replacement product. Most policies include access to a rehabilitation service that works with the employee, the employee's GP and the employer's HR team to help the employee return to work earlier than they otherwise would. The service typically covers physical rehabilitation (physiotherapy, occupational therapy), mental health support and structured return-to-work planning.
An Employee Assistance Programme (EAP) is often bundled with the GIP policy and is available to all employees, not just those on claim. The EAP provides confidential telephone counselling, mental health support, debt advice, legal advice and similar services. The EAP is typically the most-used component of a GIP scheme in cash terms, even though the headline product is the cash benefit on long-term incapacity.
The combination of cash benefit, rehabilitation support and EAP gives the employer a structured wellbeing platform alongside the insurance protection. For larger employers, the rehabilitation outcomes can produce a measurable reduction in long-term absence, which feeds back into a lower premium at renewal.
Who is typically covered and how the underwriting works
Most GIP policies cover all employees who meet a defined eligibility category (often "permanent employees working at least 16 hours a week" or similar). Eligibility is usually defined in the policy and the employer's employment contract terms. Employees who join after the scheme start date are covered from the date they meet the eligibility category, sometimes after a short waiting period.
Group underwriting works on a "free cover limit" basis: each employee is covered for a benefit up to the free cover limit without individual medical underwriting. Above the free cover limit, the insurer requires individual underwriting (medical questionnaires, sometimes medical examinations) before the additional cover is in force. The free cover limit depends on scheme size; larger schemes have higher limits, often well above the salaries of all employees.
Pre-existing conditions are normally covered, subject to the policy's definition of "actively at work" at the scheme start date and to any specific exclusions applied at underwriting. The "actively at work" test typically requires the employee to be performing their normal duties at the scheme start; an employee already absent on the start date may have restrictions.
How GIP differs from personal income protection
Personal income protection is a policy the employee takes out and pays for individually. The benefit is tax-free when paid (because the premiums are paid from post-tax income), the benefit level is set by the individual, and the policy moves with the employee between jobs. GIP is paid for by the employer, the benefit is taxable as employment income, and the cover usually ends when the employee leaves employment.
The cost profile differs accordingly. Personal income protection premiums are paid from post-tax personal income, which makes them more expensive in net terms than the equivalent group premium. Group policies benefit from scale (the average risk across the workforce is more predictable than the risk for an individual), so the gross premium per pound of cover is lower in a group structure.
Some employees with high incomes or specific concerns take out personal income protection alongside the workplace GIP, to top up the cover and to maintain protection in case of job change. The combination is normally allowed but the benefits offset against each other depending on the personal policy's wording.
Claims experience and what employees should expect
The claims process starts with notification to the employer's HR or benefits team, who notify the insurer. The insurer's claims team requests medical evidence (GP reports, hospital records, specialist letters) and asks the employee to complete a claim form. A telephone interview is increasingly common at the front end of the process.
Most claims are decided within 4 to 12 weeks of the claim being submitted, depending on the complexity of the medical evidence and the claim definition. The employer's sick pay arrangements typically cover the income gap before the GIP benefit starts; some employers ask the insurer to advance benefit on a goodwill basis during a delayed claim decision.
The Association of British Insurers publishes annual claims statistics for the protection insurance market. Industry-wide claim acceptance rates on long-term protection products typically run well above 90 percent, although individual insurer figures vary. Disputed claims can be escalated to the Financial Ombudsman Service.
How we verified this
This article reflects HMRC guidance on the tax treatment of employer-paid group income protection premiums and benefits, the FCA's regulatory framework for general insurance and protection products, the Association of British Insurers' published claims statistics for the protection insurance market, the Equality Act 2010 provisions on disability and reasonable adjustments at work, and Department for Work and Pensions guidance on Statutory Sick Pay and Employment and Support Allowance. Specific policy terms vary widely between insurers and the policy schedule for a particular scheme should always be checked.
Disclaimer: This article is general information about UK group income protection insurance. It is not personal financial advice and is not a recommendation of any particular product or provider. Cover, premiums and claim definitions vary between insurers. Employers considering setting up a scheme and employees with detailed questions should take advice from a regulated employee benefits consultant or an FCA-authorised protection adviser.
Frequently asked questions
What is group income protection?
Group income protection is an insurance policy taken out by an employer to provide continuing income to an employee who is unable to work for a long period due to illness or injury. Typical benefits replace 50 to 75 percent of pre-incapacity salary after a deferred period of 13, 26 or 52 weeks, and pay until the employee returns to work, reaches the cessation age, or no longer meets the incapacity definition.
Is group income protection a taxable benefit?
The employer's premium is not normally treated as a taxable benefit in kind on the employee, because the benefit when paid is taxed as employment income. The benefit, when paid, is treated as employment income, subject to PAYE income tax and employee National Insurance in the normal way.
How long does group income protection pay out?
It depends on the policy. A full-term policy pays until the employee returns to work, reaches the cessation age (often state pension age), or no longer meets the incapacity definition. A limited-payment policy pays for a maximum of two or five years on a single claim. The policy schedule states the structure.
Does group income protection cover mental health?
Yes. Most modern group income protection policies cover mental health conditions on the same terms as physical conditions, subject to the same definition of incapacity, deferred period and benefit period. Claims for mental health conditions are now a meaningful share of total claims in the UK protection market, reflected in the Association of British Insurers' published claims data.
What happens to my group income protection cover if I leave the job?
Cover normally ends when employment ends. Some policies offer a "continuation option" allowing the employee to take out an individual income protection policy with the same insurer without further medical underwriting, subject to the option's terms. Where this is not available, the employee can seek personal income protection cover on the open market, which will involve individual underwriting.
