Employers’ Liability Insurance is compulsory under many circumstances in the UK.
Employers’ Liability insurance is a legal requirement in the UK for many businesses. Fines of up to £2,500 a day can be issued to businesses inadequately insured.
You will need active insurance from the moment you become an employer for a minimum of £5 million. However, the level of cover you need will depend on the size of your business. Failing to produce an EL certificate when asked by an inspector may result in a fine.
However, some groups are not subject to the legislation. For example, businesses aren’t required to have EL if they are both:
- Non-limited companies
- Only employing immediate family members
Who counts as an immediate family member in employers’ liability insurance?
Employers’ Liability insurance is compulsory for many businesses. However, there are a few exceptions.
- Spouse or civil partner
- Parent (including step-parents)
- Children (including step-children)
What will employers’ liability cover my business against?
An Employer’s Liability insurance policy is similar to Public liability insurance. It covers claims of personal injury, illness, and property damage from employees.
Often, injury claims will be for slips, trips, and falls. Following an accident, an employee may be entitled to compensation from your business. Your insurer would cover legal costs and, should their claim be successful, compensation.
The cost of compensation claims can be high, and not all businesses can afford them. For this reason, Employers’ Liability insurance is compulsory for most businesses. It ensures that employees will receive the compensation owed to them in the event of an accident.
EL will also cover you for claims of work-related illness. For example, a construction worker may develop carpal tunnel or ear damage. Similarly, adverse effects of asbestos might result in a claim further down the road.
How can I tell if someone counts as an employee?
If someone counts as an employee, Employers’ Liability insurance becomes compulsory. If you are unsure of whether someone working with or for you is an employee, there are a few quick tells.
1) Do you deduct National Insurance and income tax from their wages through the PAYE system? If they’re on the payroll, they will count as an employee. As such, you will likely need Employers’ Liability Insurance cover.
2) Do you supply their equipment and materials?
3) Do you enforce a dress code?
Remember, if in doubt, speak to your business insurance provider.
Do I need employers’ liability insurance for contractors?
You may not need EL insurance for an independent contractor. However, it’s best to get advice if you’re not sure. There are circumstances where contractors are treated as employees. In some cases, businesses hire contractors while they work under their direction. When a business owner acts in almost every way as an employer, this blurs the line. In such situations, EL cover may be appropriate.
Do I need Employers’ Liability insurance for subcontractors?
Whether employers’ liability is compulsory for subcontractors will vary on the contractor. Bonafide subcontractors provide their own equipment/materials and work under their own direction. Therefore, you will rarely need Employers’ Liability insurance for bonafide subcontractors.
However, labour-only subcontractors will require direction. You will also provide them with equipment and materials. As such, legally, labour-only subcontractors count as employees. and you will need to take out employers’ liability for them or face fines of up to £2,500 for every day you are uninsured.
Not having EL cover for Labour-only subcontractors can be risky. Not only because it is often illegal, but contractors may not have sick pay benefits. Therefore they’re more likely to sue than a regular employee should they be injured.
Do I need employers’ liability insurance if am self-employed?
You don’t need to have an employer’s liability policy if you are self-employed and work alone. You also won’t need one if you work with a partner who is also self-employed.
Does a limited company need Employers’ Liability Insurance?
Limited companies must have Employers Liability if they employ one or more people. You will also need an EL cover if you have more than one director. Unlike non-limited companies, this applies regardless of whether you exclusively hire family.
Do I need employers’ liability insurance for part-time workers?
Yes. If you meet the criteria above, you will need to have cover for part-time employees. For example, you largely run your business by yourself but have a part-time assistant. You will need cover if you are either:
- a limited company
- A non-limited company, and your assistant is not an immediate family member.
Do I need Employers’ Liability insurance for volunteers?
For this, the answer is usually yes. If you have employers’ liability, your existing policy will likely cover volunteers. If you do not have cover, check with your broker for advice.
Do I need insurance for temporary staff? What about school students doing work experience?
Yes, employers’ liability is compulsory for temp workers and work experience. This is the case even if the work is unpaid.
Remember to be mindful when hiring school-age employees. Suppose you are taking on minors for work experience or as part-time staff. As an employer, you must also make sure you follow your local guidelines and have the correct permits. These must be in place before they start work.
Not having the correct permits can invalidate your employer’s liability insurance. This can result in fines, even if you have been paying for it.