Research carried out by accountancy firm RSM Tenon has shown that 42% of small or medium enterprises (SMEs) in the South could be putting their business at risk by failing to insure the key staff within their organisation. This mirrors the national total of 42% across the UK.
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 amongst senior management in small and medium sized enterprises, showed that many SMEs in the South had not made contingency plans for the loss of a key member of staff – 32% said they had insured their senior people, with 22% saying they had some of their senior people insured.
Taking out insurance against the death or long-term illness of key staff may cushion 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 should a business partner die.
Stephanie Wilson, RSM Tenon’s head of employer solutions for the Southern Region, said: “It is common practice for business owners to insure their company against theft, fire and flooding however not so common to insure their highly-skilled staff.
"Coping with the death or long-term illness of a key member of staff is difficult, so businesses need to ensure that they have procedures in place to minimise the detrimental effect such loses could have on their productivity.”
