What is Employers’ Liability Insurance?
If an employee is injured whilst at work or they (or former employees) become ill as a result of their work they are entitled to seek compensation from the employer responsible. Employers’ Liability Insurance ensures that the employer has insurance protection against a claim and can meet the compensation costs.
An example would be if an employee suffered injury as a result tripping and falling in the work place.
Do I have to buy it?
The short answer is yes, if you have employees Employers’ Liability Insurance is a legal requirement. Failing to meet this requirement could result in a possible fine of £2500! Policies provide £10 million cover as standard with a minimum requirement of £5 million.
Are there any exemptions for small businesses?
There are two very limited exemptions.
- Family businesses which are not limited companies* where all the employees are closely related. (Husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister).
- Companies employing only their owner where that person owns 50% or more of the share capital.
*this exemption does not apply to family businesses which are incorporated as limited companies
What is the definition of an Employee?
There is often confusion around labour only sub-contractors and volunteers. Both are likely to be considered as employees for the purposes of Employers’ Liability Insurance. The deciding factors are the nature of the relationship and the degree of control that you have over the work, not whether PAYE/National Insurance is deducted or whether they are called self-employed or a volunteer.
What should be considered when assessing whether someone is an employee?
Do you …
- deduct national insurance and income tax from the money that you pay;
- have the right to control where and when they work and how they do it;
- supply the work materials and equipment;
- have the right to the profit the workers make;
- require only that person to deliver the service and not a substitute if they are unable to work;
- treat them in the same way as other employees e.g. they do the same work under the same conditions as someone else you employ.
If the answer to any of these is yes you are likely to need to have Employers’ Liability Insurance in place.
Is their help available to meet my Health and Safety obligations?
You have a responsibility for the Health & Safety of your employees whilst they are at work including carrying out risk assessments and taking all reasonable measures to protect them. Taking these measure to protect your employees may help prevent any Employers Liability claims from arising.
For help with these responsibilities sign up for our Risk Management tool, Risk Partner – it is FREE – go to www.myinsurancepartner/extras