Employers' Liability Insurance

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A Guide to Employers Liability Insurance

In most instances, if you employ one or more people, you are obliged to take out employers liability insurance.

There are one or two exceptions to this where another type of insurance may suffice.
The following are the most frequently asked questions regarding employers liability insurance, and when you need it.

What are the Employers Liability Insurance requirements?

Whether you employ one, or twenty-one people, you are responsible for your employees health and safety in the workplace. And not just in the workplace.
If a former employee develops an illness which can be traced back to working practises while in your employ, they may also be able to apply for compensation.
Your employers liability insurance provides you the minimum cover needed against any such claim by present or past employees.
It does not however, cover you for any claims made by non-employees, (members of the public) against your business.

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Do I need Employers Liability Insurance?

No matter what your business, a small corner shop employing one or two part-time staff, an engineering business, or operating in the service sector - accidents happen.
An employee could injure their back on a slippery floor, fall from a set of steps, or injure hands in machinery.
Your liability insurance is there to cover any claim made against your business by past or present employees.
For peace of mind, you should consider liability insurance an investment in your business, not an unwanted overhead.

What does Employers Liability Insurance Cover?

Any injuries sustained by poor health and safety practises such as slippery or uneven floors.
Also, inadequately maintained equipment, insufficient training or unsatisfactory working practises are all grounds for compensation claims in the event of injury or accident.
Your employers liability insurance is there to meet all these eventualities, allowing you to cover the cost of any accident compensation awarded, including loss of earnings and accrued legal and medical expenses.

Do I need Employers Liability Insurance for a limited company?

The short answer is yes. The long answer is – longer. If you hold 50% of the shares, and work for your limited company alone, you don’t need employers liability insurance.
If you own 50% of the shares, and only employ family, husband/ wife, adult children, you don’t need liability insurance.
If you employ one or more non-related employees, you do. Unless that is, the limited company is an organisation such as police, fire, government department, health authority or service, or is publicly funded. Then other forms of cover come into play.

Is Employers Liability Insurance Compulsory?

To comply with UK law, the answer is yes. If you risk operating without the required insurance, depending on the severity of the offence.
You could be fined up to £2500 per day, for everyday you’ve operated without cover.
There are certain exemptions (see other questions), where employers liability insurance is not a legal requirement, but they refer in the main to businesses employing family members.

How much does Employers Liability Insurance cost?

That depends very much on the business you operate, and how many people you employ.
As a general rule, your employers liability insurance requirements are five-million pounds worth of cover.
Under normal conditions this amount is deemed adequate for any claim for loss of earnings, illness, medical fees and legal costs should a claim end in the courts.

When do I need Employers Liability Insurance?

You can start your business as a sole trader, and operate as long as you like with no need of employers liability insurance.
You can take on one or more family members, husband, wife, son, daughter, or wider family, and continue operating without employers insurance.
However from the day you employ anyone not associated with the family, you are required to have employers liability insurance.

How much Employers Liability Insurance do I need?

The legal minimum amount of employers liability insurance required is £5,000,000 of cover.
This is deemed adequate for the majority of businesses in the UK, although many providers offer double that as standard.
However, if you operate a high risk business, site work in the petroleum/oil industries, hazardous material industries or other, the amount of cover required may be higher.

Do I need Employers Liability Insurance for self employed workers?

This can be a bit of a grey area, so having a chat with your insurance provider is recommended.
Basically, you do not require employers liability insurance for self employed workers provided you engage the services of contractors who work for other businesses, using their own tools and equipment.
In this situation they should have their own cover.
If however, you engage contractors who use your tools and equipment to complete the work, you probably require employers liability insurance.

Do I need Employers Liability Insurance for part-time workers?

Yes, whether full time or part time staff, or students on work experience, you must have employers liability insurance in place.

The exception would be if you were a sole trader and the part time employee was a family member.

Do I need Employers Liability Insurance for volunteer workers?

Providing they are only helping as-and-when, you probably don’t require additional employers liability insurance for volunteer workers.
However, checking the grey areas with your provider is recommended.
If you don’t have any cover at all, consider getting some.
Volunteers or not, if an accident happens, they are entitled to seek legal advice regarding a claim for compensation against you or your business.

Is Employers Liability Insurance and public liability insurance the same thing?

No, employers liability insurance and public liability insurance, are two separate covers, although they are often taken out as part of an insurance package by businesses.
Employers liability covers you for claims by past or present employees, for injury or illness caused at their (your) place of work.
Public liability insurance covers members of the public who are injured on your premises or place of work.
That could be slipping on a wet floor in a shop, or by a scaffolding collapse erected by your employees on a building site, which hits members of the public, or other site workers not employed by you.

Is Employers Liability Insurance the same as professional Indemnity Insurance?

No, professional indemnity insurance protects you or your business against claims of faulty goods, or goods provided by your business deemed not fit for purpose by the buyer.

This could be anything from an unnoticed design or manufacturing fault to a pure misunderstanding of customer requirements or expectations.
It is cover often taken out by professional businesses, who provide advice and services to clients where a simple spelling mistake, or dot put in the wrong place, can have serious legal or financial repercussions.
As a small business owner, making sure you have the correct insurance in place to cover all scenarios is just common sense.
Have a chat with your employers' liability insurance provider.

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