Key person protectionYour key people are your most valuable asset. A key person is identified as a staff member that is instrumental to the on-going success and profitability of your business. Such an employee does not have to be an owner or director of the business; it could be a technical expert or outstanding salesperson. It can even be someone whose operational expertise is critical to the business.
If that key person became totally disabled (either temporarily or permanently) or died then the on-going revenue of the company would be affected – potentially having a disastrous impact on your business’ revenue and sustainability of your business. For example, depending on how critical and how replaceable that key person is one of the decisions may need to be whether the business will be able to trade on or whether it would need to be wound up. |
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Another factor to consider is, where there is more than 1 key person in the business, the impact on the business in the event of death or disability could result in different financial outcomes. The good news is that you don't need to leave this to chance. A sound analysis and implemented plan can help ensure business continuity. For help, or if you would like to know more, click here to email us or call us on the numbers below.
The financial impact on the business can be located in 2 areas, broadly speaking:
- one off expenses as part of a transition to a replacement
- ongoing reduction of income requiring additional cash flow to help with ongoing business expenses during the critical period
- costs of recruiting, relocating and training a replacement
- assisting to clear or reduce business related liabilities
- providing financial, emotional and market stability within the business whilst restructuring is taking place.
- additional costs of winding up the business
It is important to note that these lump sum benefits are there to cover one off costs that may arise through the event affecting your key employee(s). These are different to the costs covered by an additional agreed level of income being paid to the business to cover ongoing expenses or impact on profit. This ongoing monthly income stream to the business can provide for:
So as you can appreciate the costs in your business that this benefit provides cover for are separate and distinct from the expenses covered by the lump sum benefits. What is important is to clearly identify financial impact in the event of death, permanent and temporary disability of a key person, and then to ensure you have the right provisions in place to help you offset the impact. If you would like help click here to email us or call us on the numbers below.
- revenue for the purpose of covering day to day business expenses
- assisting the business to clear or reduce business related liabilities
- internal restructuring and retention of other existing key personnel
- assisting the business to retain key contracts
- financial, emotional and market stability within the business whilst restructuring is taking place.
So as you can appreciate the costs in your business that this benefit provides cover for are separate and distinct from the expenses covered by the lump sum benefits. What is important is to clearly identify financial impact in the event of death, permanent and temporary disability of a key person, and then to ensure you have the right provisions in place to help you offset the impact. If you would like help click here to email us or call us on the numbers below.
