Long-term illness is a financial catastrophe for most employees. Sick pay runs out. State benefits are limited. Savings disappear. Group Income Protection — salary replacement insurance — is one of the most meaningful protections an employer can offer, yet it remains significantly underutilised in Ireland compared to the UK and continental Europe.

This guide explains what Group Income Protection is, how it works, and how to structure it correctly for your organisation.

The Problem: What Happens When Sick Pay Runs Out?

Under Irish law, there is no statutory sick pay obligation beyond a limited number of days (though this is increasing incrementally). Most employers operate a contractual sick pay scheme — typically full pay for a period, followed by half pay, followed by nothing.

When that sick pay runs out, an employee suffering from a long-term illness faces an extremely difficult situation:

  • State Illness Benefit (a flat weekly payment) is unlikely to meet their normal outgoings
  • Their mortgage, rent, and household expenses do not stop
  • Savings, if any, are rapidly depleted
  • The financial stress compounds the medical stress — impeding recovery

Group Income Protection solves this problem by providing ongoing salary replacement, funded by the employer’s group insurance policy.

How Group Income Protection Works

The Deferred Period

The policy does not pay from day one of absence. Instead, there is a deferred period — a waiting period agreed when the scheme is established. Common deferred periods are:

  • 4 weeks — suited to employers with limited sick pay arrangements
  • 13 weeks — the most common choice, aligning with the end of contractual sick pay
  • 26 weeks — for employers with generous sick pay provisions
  • 52 weeks — for very generous sick pay schemes or self-insuring employers

The longer the deferred period, the lower the premium. Choosing the right deferred period is one of the most important structural decisions in Income Protection scheme design.

The Benefit Level

Once the deferred period is over, the insurer pays an income replacement benefit — typically 66% to 75% of the employee’s pre-disability salary. This benefit is paid via the employer’s payroll and is subject to PAYE, PRSI, and USC in the normal way.

The benefit continues until:

  • The employee recovers and returns to work
  • The employee reaches normal retirement age
  • The employee sadly passes away (at which point Group Life Insurance provides a lump sum)

Mental Health and Rehabilitation

Modern Group Income Protection policies include benefits beyond simple salary replacement:

  • Mental health coverage — claims arising from depression, anxiety, and burnout are covered under most policies
  • Employee Assistance Programmes (EAPs) — many policies include access to counselling and mental health support
  • Rehabilitation support — case management and phased return-to-work programmes

These ancillary benefits can actually reduce the total cost of the scheme by facilitating earlier recovery and return to work.

Tax Treatment

For employers:

  • Premiums are fully deductible against corporation tax
  • The scheme creates a predictable, manageable cost for long-term absence

For employees:

  • The benefit is paid via payroll and is taxed as normal income (PAYE/PRSI/USC)
  • No Benefit-in-Kind arises on the premium paid by the employer

Choosing the Right Insurer

The Irish Group Income Protection market has several active insurers with meaningfully different:

  • Premium rates (which vary significantly by workforce age and industry)
  • Definitions of disability (“own occupation” vs. “any occupation”)
  • Deferred period and benefit level options
  • Claims management approaches

As Group Risk advisors, we approach every insurer in the market simultaneously — ensuring you receive competitive pricing and the most favourable policy terms available.

GroupRisk.ie specialises exclusively in Group Risk for Irish employers. Contact us for a free, no-obligation consultation.