Employers’ Liability insurance is a legal requirement in the UK for many business owners, and not having cover when you should can result in fines of up to £2,500 per day you are not adequately insured.
You will need to be insured 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.
An employer can also be fined £1,000 on the spot for failing to produce your insurance certificate when asked by an inspector.
However, some groups are not subject to the legislation. If you are both a non-limited company and exclusively employ immediate family members, you are not legally required to have Employers’ Liability insurance.
Who counts as an immediate family member in Employers Liability Insurance?
- Spouse or civil partner
- Parent (including step-parents)
- Children (including step-children)
What will Employers Liability cover my business for?
An Employers Liability insurance policy is similar to Public liability insurance in that it will cover you for claims of personal injury, illness, and property damage from employees for losses caused through their work for you.
Most commonly, this will be for slips, trips, and falls. Following an accident, an employee may be entitled to compensation from your business for any injuries or losses. In which case, your insurer would cover legal costs of defence and compensation pay-outs, should their claim be successful.
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 to ensure 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, an employee develops carpal tunnel syndrome or ear damage after years working on construction sites. 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 you are unsure of whether someone who works with or for you is an employee, there are a few quick questions you can ask yourself.
1)Do you deduct National Insurance and income tax from their wages through the PAYE system? If you have them on payroll, they will count as an employee, and you their employer, and you will likely need Employers Liability Insurance cover.
2) Do you supply their equipment and materials?
3) Are they required to wear certain clothing, and do you enforce a dress code
Remember, if in doubt, speak to your business insurance provider.
Do I need employers’ liability insurance for contractors?
If you’re hiring an independent contractor who also works for another organisation, you may not need employers’ liability insurance, according to advice from the Health and Safety Executive (HSE). However, it’s best to get advice if you’re not sure, as there are circumstances where contractors are treated as employees.
This can be a serious problem in cases where businesses hire people as contractors while they work under their direction, and a business owner acts in almost every way as an employer.
Do I need employers’ liability insurance for subcontractors?
Whether or not you need employers liability for subcontractors will depend on the type of subcontractor you hire. The first kind is bona-fide subcontractors who provide their own equipment and materials while working under their own direction. Therefore, you will rarely need Employers Liability insurance for bonafide subcontractors.
However, if you hire labour-only subcontractors, you will be directing them yourself and providing their equipment and materials. 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 just because it is often illegal, but also because if you are outsourcing labour and an individual or group is injured and left unable to work, they may not have sick pay benefits and are therefore more likely to sue than a regular employee.
Do I need employers’ liability insurance if I am self-employed?
You don’t need to have an employers’ liability policy if you are self-employed and work alone or with a partner who is also self-employed. You also won’t need one if you are a non-limited company employing immediate family members (listed above).Does a limited company need Employers Liability insurance?
Limited companies are required to have Employers Liability insurance if they employ one or more people. You will also need EL cover if you have more than one director. Unlike non-limited companies, this applies regardless of whether you exclusively hire the immediate family members listed above.
Do I need employers’ liability insurance for part-time workers?
Yes. If you meet the criteria laid out at the start of the article, you will need to have employers liability cover for your 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 a limited company or 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 already have an employers liability policy, any volunteers you take on will likely be covered by your existing insurance. However, speak to your insurance broker to ensure they are covered if you are pre-emptively taking on volunteers.
Do I need employers’ liability insurance for temporary staff or school students doing work experience with us?
Yes, you will need employers liability for temp workers and any work experience students you have at your business, even if it is unpaid.
Suppose you are taking on minors for work experience or as part-time staff. As an employer, you must also make sure you are following your local guidelines and have the correct permits in place before any minor starts work.
Not having the correct permits can invalidate your employers’ liability insurance and result in the fines attached to not having EL insurance, even if you have been paying for it.