Employee Benefits
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Protecting Key Employees
Each of the 3 directors of MNO Ltd is crucial in their own right to the success of the business. They are each replaceable in time, but have either personal knowledge or contacts that would cause a short-term problem to the company which, if it occurred at the wrong time, could lead to its downfall.
In order to provide short-term cash flow in such a crisis, the company takes out life assurance and critical illness benefit of £50,000 on each director. In the event of their death, the company will have funds to pay the bills and recruit a replacement.
In the event of one of the directors contracting one of a range of illnesses (cancer, heart attack, etc.), the company will have sufficient funds to keep the company afloat whilst the director recovers.
The premiums are not treated as a trading expense of the company, but any benefit is not treated as a trading receipt (Such policies are usually structured in this way, but the converse could apply, if desired).