If someone who works for you (paid or unpaid) has an accident, injury or becomes ill and says it’s because of the work they do for you, they can make a claim against you.
Employers’ liability (EL) protects your organisation by covering the legal fees to fight your corner. And if you’re held accountable, and compensation’s awarded, your insurance pays that too.
EL is a legal requirement. It doesn’t matter if you’re a multinational business, a small start-up, or you’re not-for-profit. As soon as someone works for you, you’re responsible for their welfare at work under UK law.
The Health and Safety Executive (HSE) is responsible for enforcing the law and checking organisations comply with the regulations. So they’re the ones who make sure you have an up-to-date EL policy.
The HSE take it seriously too. You can be fined £2,500 every day your company isn’t insured. And you can also face a £1,000 fine if you don’t display your EL certificate or refuse to make it available for inspectors when they ask.
Do I need to have employers’ liability?
If anyone works for you, then (with very few exceptions) you need employers’ liability insurance. It’s the law.
Those exceptions are:
- companies where the owner is the sole employee, owning 50% or more of the issued share capital
- family businesses that aren’t incorporated as limited companies where all employees are closely related to the owner. This means they’re your mother, son, brother, sister, husband, wife etc.
- some publicly funded organisations
- businesses where all employees don’t live in the UK. If you fall under this category, you should check the laws in the country where your staff are based, just in case there are relevant measures in place there.
If in doubt, you can check the HSE guide for employers or contact your insurer or broker.
Who is classed as an employee?
Who counts as an employee can be a bit of a grey area as it’ll depend on the terms of your contract with an individual. And that contract can be verbal, on paper or even implied.
If you arrange someone’s National Insurance and income tax contributions, then they’re an employee. The same applies if you specify where and when they work.
Add to the list labour-only subcontractors, temps, apprentices, secondees, or if you own a salon and rent out a chair. You have responsibility for these people in their work environment. So they’re your employees too – as far as the Employers’ Liability (Compulsory Insurance) Act is concerned.
You also have a duty of care to volunteers, helpers and work experience kids (so people you don’t pay). They may count, depending on your agreement, so it’s worth checking with your insurer.
And what about freelancers? It’s not a legal requirement to have employment liability for freelancers. But, your contract and how they work with your business could determine your need for EL if they have a work-related injury and sue you.
A freelancer could work with you almost as an employee. They may:
- work under your company name
- carry out the same business activities as you
- work under your direction
- come into the office
- use company equipment.
If they were to claim against you for a work-related injury, it’s likely to be successful if you’re found at fault. In this scenario, your EL would support you as with any other employee.
On the other hand, you may just use freelancers on odd projects. They work independently from you, and you have no control over their working conditions. This could have a different result in court if they were to injure themselves and sue. Either way, it’s beneficial to have EL cover just in case. You can always talk it through with your insurer or broker if you’re not sure.
Anyone who employs someone for domestic help (e.g. a gardener, clearer or childminder) most likely doesn’t need employers’ liability. This is because they’ll probably work for more than one employer. But, if they’re solely employed by you, you might need EL to protect them, e.g. if they’re a live-in nanny.
Can I buy employers’ liability as an add on to my existing policy?
Yes. Employers’ liability (EL) is usually purchased as part of a package with public liability, so it’s unusual (but not impossible) to purchase it on its own. However, if you need to, you can easily add it to your existing business policy at a later date.
EL can be priced competitively, and most insurers will offer £10 million cover as standard. The amount you pay as a premium will vary depending on how many employees you have and how much you pay in wages.
How does it work?
Employers’ liability (EL) is for the benefit of both employer and employee.
EL will protect a business if a staff member has an accident or is injured while working and makes a claim that it’s your fault. Your insurer will appoint their own expert legal team to fight your corner. And, if you’re found to be liable, your insurance will pay any compensation awarded. EL takes the stress away and means you can keep running your business.
Making employers’ liability a legal requirement (rather than a moral one) also protects your staff. They’ll be protected if they have an accident or become ill and their employer’s at fault. EL will pay any compensation awarded to them, meaning they don’t have to suffer financially.
So it’s a win-win.
What’s an ERN, and why does my insurer need it?
An ERN is an Employer Reference Number.
Every business registered with HM Revenue and Customs as an employer is given an ERN. It’s unique to your company and is used by the taxman mainly for end-of-year PAYE returns.
But it can also be handy for insurers. If an employee makes an employers’ liability claim, ERN’s help identify all the companies they’ve worked for. Claims can happen years after an event (e.g. asbestos exposure), so trawling paperwork can take time.
The Employers’ Liability Tracing Office use a centralised database to track down the relevant info. They can also prove you had insurance at the time when you employed the claimant. That means your insurer foots the bill, and you don’t.
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