In most cases, if you have someone working for you, the law requires you to have employers’ liability insurance. Here’s what you need to know about this type of insurance.
What is employers’ liability insurance
Despite your best efforts workplace accidents can still happen. There are around 144 deaths and 621,000 injuries* at work each year in the UK. The proliferation of no-win, no-fee lawyers means that it’s never been easier for workers to make claims against their employers.
Employers’ liability insurance is designed to protect you against compensation claims made by employees for injury or damage to health. Employers’ liability insurance usually covers:
- the cost of compensation
- any associated legal fees.
* Source Health and Safety Executive 2016
What sorts of claims can employees make?
Here are some examples of incidents that can trigger claims for compensation.
Imagine if the employers of these people did not have employers’ liability insurance. Paying damages and legal fees could have a severe impact on their businesses and could even bankrupt them. That’s why the law requires most businesses to have this type of insurance – to protect not only the employees, but also the businesses themselves.
Which businesses are exempt from employers’ liability insurance?
Very few businesses are exempt from the requirement to have employers’ liability insurance. The main cases where you do not need this type of insurance are if you:
- are a sole trader with no employees
- run an unincorporated family business in which all of your employees are closely related to you
- are the only employee and own 50% or more of the share capital of the company.
To check if your business is exempt from employers’ liability insurance see the Health and Safety Executive (HSE) website.
How much employers’ liability cover do I need?
You need at least £5 million of cover, although many insurers offer a minimum cover of £10 million. You are also required to display a certificate of the insurance where your employees can see it (printed or online).
Who should my policy cover?
Type of Employee | Who should be covered |
---|---|
Permanent | There are a number of criteria that distinguish employees from other types of workers, two key ones being that: 1) they have income tax and National Insurance contributions deducted from their salary 2) their location, conditions and hours are controlled by you, the employer. |
Short-term | These include contract, seasonal and casual employees. |
Labour-only subcontractors | These are sub-contractors who do not provide their own materials and tools normally, and who work under your direction. Don’t confuse these with bona-fide subcontractors who will usually work under their own direction, use their own tools and materials and crucially have their own insurance. |
Temporary staff | These include students, people on work placements and volunteers. |
How much does employers’ liability insurance cost?
This will depend very much on the type of business you operate and the potential risks in the work your employees undertake. People tend to buy a combined packages of insurances – such as employers liability, public liability and professional indemnity – so you’d rarely know what the precise cost of each type of insurance is.
A variety of polices are offered by insurance providers and brokers, who will assess the amount of insurance cover your business is likely to need and what would be covered in cases of claims being brought against you.
A no-claims discounts is applied to some policies. These discounts recognise businesses that manage potential risks well and have effective health and safety procedures, resulting in fewer claims.
Where can I buy employers’ liability insurance?
You can buy employers’ liability insurance direct from insurance providers or through intermediaries such as brokers or trade associations.
Employers’ liability insurance is sometimes included in an insurance package designed to cover a range of business needs. For instance, some insurers combine it with public liability insurance.
To check that an insurer is properly authorised check the website of the Financial Conduct Authority (FCA).
What are the penalties for not having employers liability insurance?
The penalties for not having this insurance are severe – you can be fined up to £2,500 for each day that you don’t have the insurance in place.
Consider the following scenario. An employer does not have employers’ liability insurance and one of their staff develops an illness which a court decides is due to negligence on the part of the employer. Not only does the employer have to pay damages and legal costs, but they also must pay the fines for not having the right insurance – this could potentially total hundreds of thousands of pounds.
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