Employers Liability Insurance
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What is the employer’s liability insurance?
Employers liability insurance is required by law for business owners who employ more than one person. It covers the cost of any compensation if an employee brings a claim against their employer. This might be as a result of injury, sickness or any other problem caused which their employer is liable for.
Accidents can happen even in the safest of workplaces. It is a legal requirement for UK businesses to have employer’s liability cover for a minimum of £5 million. Failing to have appropriate cover in place could result in a fine of up to £2500 for each day a business is not insured.
Do I need employers liability insurance?
If you are a business owner with more than one employee, then you must ensure the right cover is in place. This applies to businesses in all sectors. There are a few exceptions. You might not a need cover if any of the following apply:
- Your business is a limited company with only one person employed. This person must also own over 50% of the share capital
- Businesses run as a sole trader, and are not a limited company do not need cover
- Companies which are not limited, and may have more than one employee but these are family members will not need employers liability insurance
- Businesses consisting of a partnership of directors, where no-one else is employed.
For these types of business, the cover is not required.
You will need to make sure you do have a cover if any of the following apply:
- You deduct NI and tax at source for any employees you have.
- Employees who are paid on a per week, per day or per hour basis.
- The business supplies most of the materials needed for an employee to do their job.
- The contract for the role that the employee performs can only be performed by them. They would not be able to contract it out to anyone else if they were unable to perform their duties.
What does it cover?
In the event an employee or ex-employee brings a claim against your business, the legal costs can be significant. Employers liability insurance will cover these legal costs. It will also cover the cost of any compensation ordered as a result of the claim. This can often be the case in the event an employee suffers an injury whilst at work which requires ongoing therapy or treatment. If the cover was not in place, the cost of funding such compensation can cause a business to go under, as costs can run into tens of thousands of pounds.
The policy will cover all types of employees, including full and part-time workers. Self-employed contractors would also normally be covered if they have been hired to work at your business. If you use volunteers, temporary staff or apprentices during the course of your business, they would also be covered by employer’s liability policies.
What types of employee do I need cover for?
Employer’s liability policies cover all types of employees, including full and part-time workers. Self-employed contractors would also normally be covered if they have been hired to work at your business. If you use volunteers, students, temporary staff or apprentices during the course of your business, they would also be covered by employer’s liability policies.
Business that need employer’s liability insurance
The following types of business are likely to need employer’s liability insurance:
- Hairdressers salons
- Motor trade businesses
How to save money on employers liability insurance?
- Reducing the risk of a claim may lower the cost of your policy. It is vital to ensure your business has robust health and safety policies in place. Employees should be trained in the health and safety policies relevant to them. It also pays to be aware of best practice and any specific rules or regulations for your industry sector.
- Training staff to identify risks can reduce the chance of accidents occurring. Good hygiene policies will also reduce the risk of sickness and ill health.
- Comparing cover from a range of different insurers is important to assess the range of policies on offer. The cost of a policy will depend on the type of business you run, and also the number of employees a business has. If you operate multiple sites as part of your business, you should also seek advice to discuss the best options.
- You could save money on your employer’s liability by combining this type of cover with a comprehensive business insurance or public liability insurance policy.
Is employers liability insurance a legal requirement?
Yes, if you operate a business with more than one employee, you will need to arrange a suitable policy.
What does an employers liability cost?
The cost of a policy will depend on a number of factors. You will need to consider the number of employees to cover, the type of business, and whether it could be considered a high-risk environment. You can compare costs from multiple providers to find the cost most suited to your business.
What is the right level of cover?
The minimum level of employer’s liability coverage required by law is £5million. Many policies will cover up to £10 million as part of a standard policy.
I only have part-time staff. Do I need employers liability insurance?
Yes, you will need to have insurance cover in place for part-time members of staff. The legal requirement for cover also applies to temporary staff, apprentice workers, and any volunteers who work for your business.
I only employ family members. Do I need the cover?
Close family members working for a non-limited company are exempt from the legal requirement for employers liability insurance.
Can an ex-employee bring a claim?
Even ex-employees can bring a claim for compensation against a business, so it is important to have the right cover in place.
What do I need to do to arrange employers liability insurance?
You will need your HMRC employer reference number. This is the number used to identify your business for national insurance and income tax purposes. In the event of a claim, this number will be used to identify the companies an employee has worked for, and establish that appropriate cover was in place for your business at the time period relating to the claim.
What does ‘claims occurring’ cover mean for employer’s liability insurance?
Employers liability insurance is arranged on a claims occurring basis. This means that even if a policy is no longer in place, the policyholder is insured against claims brought which relate to the period of time when the cover was in place.