What is Employers’ Liability Insurance?

A man holding a fire extinguisherIf you employ someone you are responsible for the health and safety of your employees when they are at work. Your employees may be injured at work or they, or your former employees, may become ill as a result of their work while in your employment. They might try to claim compensation from you if they believe you are responsible. The Employers’ Liability (Compulsory Insurance) Act 1969 requires that you have at least a minimum level of insurance cover against any such claims. Employers’ Liability insurance will enable you to meet the cost of compensation for your employees’ injuries or illness whether they are caused on or off site. However, any injuries and illness relating to motor accidents that occur while your employees are working for you may be covered separately by your motor insurance.

Public Liability insurance is different. It covers you for claims made against you by members of the public or your clients, but not for claims by employees. While Public Liability insurance is generally voluntary, Employers’ Liability insurance is compulsory. You can be fined if you do not hold a current Employers’ Liability insurance policy that complies with the law.

How much cover will I need?

You must be insured for at least £5,000,000. In practice, most Insurers in the UK will offer cover of at least £10,000,000.

Do I need Employers’ Liability Insurance for all the people who work for me?

You are only required by law to have Employers’ Liability insurance for people who you employ under a contract of service or apprenticeship. Whether or not you need Employers’ Liability insurance for someone who works for you depends on the terms of your contract with them. This contract can be spoken, written or implied. It does not matter whether you usually call someone an employee or self-employed or what their tax status is. Whether you choose to call your contract a contract of employment or a contract for services is largely irrelevant. What matters is the real nature of your relationship with the people who work for you and the nature and degree of control that you have over the work they do.

The following paragraphs may help give you some indication of whether or not a person is an employee under the Employers’ Liability (Compulsory Insurance) Act. However, it is for you to satisfy yourself of the status of the persons working for you and if you have any doubts, you should contact us and we will be happy to advise you.

You may need Employers’ Liability Insurance for someone who works for you where:

  • You deduct national insurance and income tax from the money you pay them;
  • You have the right to control where and when they work and how they do it;
  • You supply their work materials and equipment;
  • You have a right to any profit your workers make although you may choose to share this with them through commission, performance pay or shares in the company;
  • You require that person only to deliver the service and they cannot employ a substitute if they are unable to do the work; or they are treated in the same way as other employees, for example, they do the same work under the same conditions as someone else you employ.

You may not need Employers’ Liability Insurance for people who work for you where:

  • They do not work exclusively for you (for example, if they operate as an independent contractor);
  • They supply most of the equipment and materials they need to do the job;
  • They are clearly in business for their own personal benefit;
  • They can employ a substitute when they are unable to do the work themselves;
  • You do not deduct income tax or national insurance. However, even if someone is self-employed for tax purposes they may be classed as an employee for other reasons and you may still need employers’ liability insurance to cover them.

What happens if I do not have Employers’ Liability Insurance?

The Health and Safety Executive (HSE) enforces the law on Employers’ Liability insurance and HSE inspectors can check that you have employers’ liability insurance with an approved insurer for at least £5 million. They may ask to see your certificate of insurance and other insurance details. You can be fined up to £2500 for any day that you are without suitable insurance. If you do not display the certificate of insurance or refuse to make it available to HSE inspectors when they ask, you can be fined up to £1000.