However small or large your business is, if you employ people on almost any level, you need to protect them. Employers liability insurance cost is worth it to protect your business as well as others.To operate legally in the UK, you have to have employers’ liability insurance and this is set out in the Employers’ Liability (Compulsory Insurance) Act 1969. This legislation protects businesses and their owners from liability claims made by employees who have been injured at work or have ill health which has been caused by their job.
As part of your duty of care to your employees you are legally obliged to have employers’ liability insurance in place as it will cover the cost of the compensation an employee may claim for. Operating illegally without the correct insurance will result in substantial penalties of £2,500 for every single day the business has traded without the insurance in place. It is not worth the potential costs to your business of trying to “get by” without insurance and there is even a chance of imprisonment if you contravene this law.
Do all Businesses need Employers’ Liability Insurance?
There are some exemptions to this legislation. You may not need employers’ liability insurance if:
- You are a sole trader and do not employ any staff. If you involve voluntary workers or work experience students in your business, then insurance will be required.
- You run a family business and only employ family members. No employers’ liability is needed unless the company is incorporated.
- Public organisations such as government departments, police authorities and National Health Service bodies do not tend to need liability insurance.
Do you have to have Insurance for all people who work for you?
Whether or not you need insurance for an individual working for your company is highly dependent on the contract between you and them. You may work with subcontractors and consultants on different levels and it depends on the way in which you work with these individuals whether they need to be covered by your insurance policy.
You are likely to need employers’ liability insurance for anybody who works for you and you deduct tax and National Insurance contributions from their wage on their behalf. You will also need insurance if you have the right to control when and where the individual works and you supply their equipment and materials for working. If you use a contractor or freelancer in the same manner you employ regular employees, then it is highly likely they will need to be covered by your insurance policy.
You may not need this particular liability insurance for people who work for you if they are not exclusively working your business, such as in the instance of an independent contractor. This will also be the case if they provide their own working materials and equipment and if they are clearly in business and working for their own personal benefits, not just for your company. People who work for you but pay their own tax and National Insurance through their own limited company or self-assessment accounts are unlikely to need to be covered by your employers’ liability insurance but it is worth discussing individual cases with your potential insurer in advance.
Purchasing Employers’ Liability Insurance
Legally you are obliged to have an employers’ liability insurance cover of at least £5 million and this is where policies start. When you purchase your insurance your certificate should clearly state the amount of cover you have put in place.
You may find employers’ liability insurance is often bundled together with public liability insurance and for best practice purposes it makes sense to have both in place. Public liability insurance is not compulsory in the same as employers’ liability is, it is still best for your business to be fully protected