Accidents happen in workplaces all the time. That’s why businesses in the UK are required to have employers’ liability insurance.
But what is it exactly? And which of your employees does the insurance cover?
Below are all the answers related to employers’ liability insurance. Read on to see how this type of insurance can affect your company.
What Is Employers’ Liability Insurance?
Business owners use employers’ liability insurance to cover the cost of compensation claims made by their employees after suffering from work-related injuries or illnesses.
If one of your employees trips on a wire and falls down a flight of stairs, for example, then that person can file a compensation claim. You can then use your employer’s liability insurance to pay for that worker’s hospitalization, rehabilitation, and other related expenses.
On top of physical injuries, employers’ liability insurance also covers psychological trauma brought about by workplace conditions and industry-related diseases.
Why Do I Need Employers’ Liability Insurance?
Having employers’ liability insurance is a legal requirement for most types of businesses. You’ll be asked to get this type of business insurance after you hire your first employee. In a sense, it’s compulsory insurance for companies that employ staff.
Non-compliance will result in the Health and Safety Executive (HSE) fining you £2,500 for each day you ran your business without employers’ liability insurance.
It should be pointed out that your employers’ liability insurance should have a coverage limit of at least £5 million — even if you only have one employee.
There are reasons why you might want to invest in employers’ liability insurance, even if it’s not a legal requirement. For one, it gives you peace of mind knowing that an authorised insurer has your back should something bad happen in your store or factory.
You can also argue that employers’ liability insurance would be the most practical type of insurance to get. HSE statistics show 1.8 million working people suffered from work-related illnesses between 2021 and 2022. In addition, 565,000 people sustained injuries while at work during the same period.
This indicates the high likelihood of your workers getting injured or ill. Having an employers’ liability insurance policy in place will keep you protected.
What Does Employers’ Liability Insurance Cover?
There are those that confuse employers’ liability insurance with public liability insurance. While they might seem the same, they’re far from it.
Public liability insurance only covers injuries sustained by clients, event sponsors, suppliers, and the general public while in your workplace or at a company event. Employers are not legally required to get public liability insurance though it’s always a good idea to get one anyway.
Employers’ liability insurance is different in that it only covers accidents relating to your employees. More specifically, employers’ liability insurance covers the cost of medical treatment, loss of earnings, compensation for pain and suffering, and legal fees.
How Many Employers’ Liability Insurance Do I Need?
The employers’ liability insurance you get will ultimately depend on several factors, including how many employees you have. As noted earlier, businesses in the UK need to have at least £5 million worth of insurance coverage. However, there are insurance companies that offer coverage that’s higher than that.
Businesses that operate in a relatively safe environment, such as construction work, could consider lower insurance coverage. The chances of getting injured in a candy shop, for example, are quite low anyway.
However, if your business requires employees to perform dangerous tasks like operating heavy machinery, you might want higher insurance coverage.
The reason is that compensation claims that could be filed against you will cost a lot, especially if there are medical expenses and legal fees. You want your existing policy that covers a lot of ground.
If unsure, you should seek professional advice. Talk to an employer that’s well-versed in these matters. A business owner who has dealt with compensation claims before can guide you through liability insurance and possibly even UK law pertaining to these matters.
The employers’ liability insurance cost will depend on the coverage you get.
Do I Need Employers’ Liability Insurance for the Following Jobs?
For the most part, you’ll need employers’ liability insurance if you hire someone to work for you. But there are a few caveats that you should be aware of.
Here’s a breakdown of different employment arrangements and how employers’ liability insurance would apply under each condition.
Contractors
Do you need employers’ liability insurance if you’re working with a contractor? This is a grey area.
If all the people you work with are independent contractors, you might not need employers’ liability insurance. Independent contractors, in this context, are those that work for multiple businesses.
But as this is a complicated setup, you should seek advice from a professional.
Limited Company
Yes, a limited company will need to get employers’ liability insurance. Any company that’s incorporated as a limited company will need employers’ liability insurance policy.
Even family members working for you need to be covered if you have a limited company.
Part-Time Workers
What if you only work with part-time workers? Will you need to have an employers’ liability policy?
Yes, employers’ liability insurance also covers part-time workers. And as such, you will need to get insurance even if your employees don’t work for you full-time. You’ll also need insurance for employees that are only with you temporarily.
But what if the employee is based outside the UK?
Anyone that’s based permanently outside the UK won’t need insurance coverage. However, if the employee will spend 14 consecutive days in the UK, you’ll need insurance. You’ll want to check with the country where your employee is based. Local laws could require you to get insurance.
Self-Employed
Working on your own? Then you won’t need employers’ liability cover. You won’t need to cover family members working with you if you’re self-employed.
But if you hire outside help, you have to give them employers’ liability coverage.
Sole Traders
Same situation as being self-employed. You won’t need coverage for family members. But once you hire a worker, you’re required to get insurance.
But what if you’re working with contractors and subcontractors? If you’re worried about their welfare, you might want to consider getting public liability insurance just in case something horrible happens in the workplace.
Subcontractor
It will depend on the arrangement you have with the subcontractor. Labour-only subcontractors who work directly under you and even use your equipment are considered employees — so they will need coverage.
Your insurance policy does not cover subcontractors that work independently and have their tools.
Volunteers
You don’t need employers’ liability insurance if you’re working with volunteers. However, if you’re running a non-profit or charity organisation, you should consider getting an insurance policy anyway to protect yourself if the volunteers file a claim against you.
While there are a few exceptions, you will have to get employers’ liability insurance as most businesses with at least one worker are legally obliged to do so.
If you’re unsure about your current setup or have questions about insurance, you should consult an expert like Construction Insure to avoid legal trouble.