Who is employers’ liability insurance for and do I need to get it?
It is there to protect you and the business and the short answer is yes you do need it. Under the Employers’ Liability (Compulsory Insurance) Act (the Act), all organisations that have staff are required by law to have employers liability (EL) insurance. There are a few exceptions but we’ll get to that.
What is EL insurance?
EL insurance will cover your financial responsibilities should a member of your staff become ill or injured as a result of working for you. Employees injured due to your negligence can seek compensation even if your business goes into liquidation or receivership.
What types of employees do I need to have cover for?
You need EL cover for all types of staff that work for you.
- Full time employees
- Part-time employees
- Voluntary workers
- Seasonal staff
- Contract staff
- Labour only sub contractors
- Students or work placements
What is the minimum insurance cover I need to have in place?
You are obliged to have cover for compensation of at least £5 million, but most policies offer cover for £10 million. The cost of your premium is usually based on a number of factors including:
- the nature of your business
- the number of people you employ (and/or the payroll cost)
- your previous insurance claims history.
When do I need to get it?
From the moment you begin the hiring process until the final goodbyes at the exit interview, you are at risk of legal action. In practice, you will need cover from the day you commence trading and maintain cover for as long as you are trading and/or employing staff.
Where are the exemptions from The Act?
The following types of organisations are exempt:
- Most public organisations, which include government departments and agencies, local authorities, police authorities and nationalised industries.
- Health service bodies, which include National Health Service trusts, health authorities, primary care trusts and Scottish health boards.
- Organisations financed through public funds, which include passenger transport executives and magistrates’ courts committees.
- Family businesses that employ only close family members. If a family business also employs non-family members, then they would be required to have EL insurance.
- Organisations with no employees, such as a sole trader.
What would happen if I didn’t get EL cover?
The Act is enforced by the Health and Safety Executive (HSE). HSE inspectors can verify whether your organisation has the appropriate cover. During their inspections, they could ask to see your organisation’s certificate of insurance along with other insurance details. If you refuse or are unable to provide these documents, you could be fined up to £1,000. If you do not have the appropriate level of insurance, the HSE can fine you up to £2,500 every day.
It’s worth noting that three out of five employers will be sued by a prospective, current or former employee while they are in business*. Although many legal actions are groundless, defending against them is still costly and time-consuming. A successful claim can also damage your organisation’s reputation.
Still think you don’t need it? Here’s why you do:
621, 000 In 2015/16 that’s how many non-fatal accidents at work occurred – according to the Labour Force Survey.
£14.1billion is the annual cost of work place injuries according to the latest HSE statistics.
5 million is the approximate number of people that are “gig” workers (e.g. freelancers, volunteer, seasonal, contract). That’s also 15% of the work force according to the Institute for Fiscal Studies. The “gig” economy includes all aspects of the workforce, from professional video editors to Deliveroo riders. They must be included in your EL cover.
1.3 million According to the HSE this is the number of working people suffering from a work-related illness – they can claim for compensation. You need to be covered for this.
The last word
You must protect your business and your employees – no matter what their status is. You may need more cover than the basic level, do contact an insurance expert for advice.
*Source: The Management File, Top 10 Threats to Small Businesses, Zywave 2012.