Does your company have a business contingency plan in place should a key member of staff be unable to work? Image courtesy of sxc.hu
Research carried out by RSM Tenon
has shown that 42 percent of UK small or medium enterprises (SMEs
) could be putting their business at risk by failing to insure the key staff within their organisation.
The death or long-term illness of a key person within a company – such as a CEO, business partner, or service line head - can cause a downturn in production and loss of profit, and in extreme cases result in a company going out of business.
SMEs are more likely to feel the impact as they can find it difficult to absorb the loss of a key employee where they have fewer members of staff.
The RSM Tenon Business Barometer, a quarterly survey carried out by YouGov
among senior management in small and medium sized enterprises, showed that many SMEs had not made contingency plans for the loss of a key member of staff – just under one in three SMEs said they had insured their senior people, with only 22 percent saying they had some of their senior people insured.
Taking out insurance against the death or long-term illness of key staff may cushions the impact on businesses by covering any potential loss of profits caused by the absence of the person, as well as any additional costs that are incurred such as temporary cover and any costs incurred by recruiting staff. Companies could also recoup the costs of buying back their interest in a company when a business partner dies.
Nick Courtney, RSM Tenon’s Head of Employee Benefits Solutions, said: “Most business owners will insure their company against flood and fire, but many do not think about the huge impact of losing highly-skilled staff. Coping with the death or long-term illness of a key member of staff is difficult, but businesses need to take steps to minimise the detrimental effect such loses could have on their productivity.
‘We have also seen cases where a business partner dies and their interest in the company passes to their spouse. Companies need to consider that where that happens, they may not be in a financial position to buy back the interest in their business. Insuring against this could help to give business owners peace of mind about the long-term future of their company.”