Summary

Private medical insurance (PMI) is an optional benefit for small UK businesses that can help attract and retain employees, lower absences, and boost productivity. The premiums are generally a tax-deductible business expense, but PMI is considered a taxable benefit for employees.

Your key choice is between an employer-backed option (group plan or healthcare trust) and funding individual cover via allowances or reimbursements, balancing cost, admin, and flexibility. You can source cover directly, through a Financial Conduct Authority (FCA) authorised broker who can advise, or via a consultant. Shop around: even very small teams can get cover, and the right setup can become a competitive advantage.

Introduction

Use of the private healthcare sector for diagnosis and treatment has been increasing since the Covid pandemic, driven by admissions paid for with private medical insurance. Increasingly this has been provided as a perk for employees. So as a small business, could, and should, you offer it to your team?

In this guide we look at the benefits of using insurance, the different types you can buy and how to manage the process, including using a broker – which is a popular option for small business owners, who are short of time and don't usually have experience in these matters.

As a small business owner, you juggle at least a dozen roles. Now, 'figuring out health insurance' is on your to-do list, and it can feel like a mountain to climb. The good news is you don't need to be an expert to make a great decision for your team. It's also worth knowing that many providers offer policies for companies with just one or two employees.

With the NHS offering universal healthcare, there is no legal requirement for businesses to offer health (also known as medical) insurance. This means you can approach it as a powerful strategic choice rather than a burden.

Why should I get insurance for my staff?

The key business wins are straightforward:

• Attract top talent: Level the playing field with bigger competitors.
• Increase employee loyalty: Keep your best people happy and motivated.
• Reduce employee absence: Private treatment extends choice which means your employee can usually be treated sooner and be on the road to recovery more quickly. Earlier access means issues are addressed more quickly with fewer complications as well. Finally greater control of their recovery also gives them control of when they're in and out of work.
• Reduce your tax bill: A major, often overlooked, financial advantage.

That last point can be a game-changer. For small businesses, you can claim health insurance premiums as a business expense (if it's for an employee or director, not just yourself personally). That's because it's classed as a valid expense of the business and eligible for tax relief.

However, there will be a cost to your employees, as private medical insurance (PMI) is a taxable benefit.

Put together, these wins mean that you can improve the productivity of your business.

How health benefits become a key tool for hiring and retention

When you're competing against larger companies for talent, a thoughtful benefits package can be the secret weapon that helps you win.

It shows potential hires that you are invested in their well-being, making your small business an attractive place to build a career.

Beyond just attracting new people, the benefits of offering employee health benefits are most obvious with the team you already have. It's a clear signal of value that builds loyalty and reduces costly turnover. When you're creating an employee benefits package, you're really investing in your company's stability and growth.

How do I choose small business health benefits?

In practice, offering health insurance for small businesses boils down to two main paths: choosing a single group plan for everyone or providing funds for employees to buy their own.

Each path has distinct benefits for your budget and your team, and understanding them is the first step to creating a benefits package that helps you attract and keep great talent.

Will you provide a single health plan for the whole team, or will you provide the funds for them to buy their own? This is the core difference between a group vs. individual health insurance approach for a company.

The first path is the traditional Group Plan , where your company selects one policy that all participating employees enrol in. Think of it as choosing one company car that everyone on the team can use.

A related, but slightly different approach is to invest in a healthcare trust. Employees get cheaper rates by being part of a scheme; but it's worth considering that you essentially have a pot of money which gets distributed by need. So if someone gets cancer for example, which is highly costly, that year's funds may well be absorbed by that one person.

In both cases, employees benefit from the purchasing power and possible discount that their employer can gain rather than them buying PMI as individuals.

The second, more flexible path is to offer a cash allowance or reimburse costs for private care. You can also allow voluntary group schemes where employees choose their own provider and pay their own premiums. A cash allowance for medical insurance is taxed exactly like salary. It must be added to the employee's payslip and subjected to PAYE tax and Employee National Insurance.

Deciding between these two approaches is your most important first step. It shapes your budget, administrative work, and your team's flexibility.

How do I source corporate medical insurance?

1. A direct relationship with a private medical insurer, understanding their credentials allows a more personal relationship.
2. Using a broker can help businesses choose the insurer best suited to your business. Again time spent understanding relationships is important. independent insurance broker can take your budget, get specific quotes for both plan types, and translate the options – typically at no cost to your business. It's worth noting that some brokers, usually larger ones, have preferred provider arrangements. This means they place all of their SME business with one insurer.

You should always look to review your company's healthcare strategy from time to time (for example every three to five years) to ensure you have the most appropriate cover.

FCA regulation

The Financial Conduct Authority (FCA) regulates private medical insurance which can provide peace of mind.

If you go directly to an insurer, many are only authorised by the FCA to work on a 'non-advised' basis. This means that not everyone has permission to give advice or recommend what would be suitable; it can only explain what its products do. It is worth checking the situation when you are investigating your options.

An FCA approved broker, on the other hand, does offer advice and makes a recommendation on what to buy based on the business's needs.

Medical insurance as a competitive advantage

Whichever option you choose, you will start a productive conversation that turns a complex problem into one of your most powerful competitive advantages.

We recommend shopping around for your SME insurance. You may want to visit amii , the voice of intermediaries and insurer members promoting and advising on health insurance, protection and wellbeing services.