Employers Liability Insurance
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Do I Need Employers’ Liability Insurance?
Employers are legally obliged to have employers’ liability insurance in the UK if their staff are not family members. This is in accordance with the Employers’ Liability (Compulsory Insurance) Act of 1969.
According to the Act, you’ll need this insurance cover if:
- Your business is in the UK and you employ one or more staff members
- You deduct National Insurance and income tax from your employees’ wages.
- You dictate how, where and when your staff works.
- You provide work equipment and materials.
- You’re entitled to any profit your employees make.
- You need your employees to perform the services you hire them for, and they’re not allowed to employ a stand-in if they’re unable to perform the work.
Should I get employers’ liability insurance for temporary staff?
Yes, you’ll need to insure the following temporary workers:
- Part-time staff members
- Students
- Those getting job experience/job-shadowing
- Volunteers
It is important to note that contractors and subcontractors have different insurance requirements:
- Contractors: You will have to seek advice from your insurance provider, as independent contractors sometimes do not need to be covered by your insurance. However, this must be determined on a case-by-case basis and will also depend on the work they’re performing.
- Subcontractors: When subcontracted as labour-only and working with your tools and equipment, they must be covered by your insurance. However, if that’s not the case and they function independently, they don’t need to be covered. If you’re not sure of the situation, consult with the subcontractor before you hire them.
How Does Employers’ Liability Work?
Employers’ liability works by protecting employers from compensation claims made by their staff. These claims will be made if employees are injured or become sick due to workplace environments or accidents.
You’ll need to notify your insurance company how many staff members you have and what kind of industry you work in so you can get a tailored policy that will cover you in all scenarios.
When Is Employers’ Liability Insurance Not Required?
Although employer’s liability insurance cover is legally required in the UK, there are some exceptions, such as:
Certified limited company
Directors of certified limited companies with no employees that hold over 50% of shares are exempt from taking out liability insurance. However, you’ll need insurance if you employ a single staff member.
And, even without any staff, your clients may require you to get this insurance before you commence work – so it is worth investing in it. For example, if the director’s work can impact the client’s project – like if he is a consultant on a big construction site where he might be injured – the client (the construction company) may insist on employers’ liability insurance.
Sole trader
Liability insurance isn’t a legal requirement if you don’t have any employees, apprentices, interns or volunteers.
Family members
You won’t be legally required to have employers’ liability insurance if you employ direct family members; however, it is not a bad idea to get this insurance, just in case an accident happens.
You can also consider getting public liability insurance to cover the costs of damage to third parties.
Public bodies
Public organisations, like health service bodies or government departments, have different insurance requirements, and employers’ liability cover is not required.
What Is Covered By Employers’ Liability Insurance?
Employers’ liability insurance protects you against a wide range of costs that you and your company could face if you have problems with an employee, including compensation claims and legal fees if an employee is injured at work.
Here are some scenarios covered by employers’ liability insurance:
Casual workers
This insurance covers casual workers, like interns, volunteer workers, and those job shadowing. Just note that even though unpaid workers are mostly covered, carefully read through your policy documents to make sure before taking them on.
Loss of income
If your employee becomes injured or ill and can’t work, they’ll lose their income. Employers’ liability cover will ensure your employees’ losses are covered while they’re recovering.
Legal costs
Legal fees can quickly stack up, having adverse financial effects on your business (especially if you have a small enterprise). You’ll be covered against the legal costs of resolving claims that have been made by your staff.
Medical expenses
If your employees suffer work-related illnesses or injuries, your insurance will cover their medical bills.
Compensation payments
Your employers’ liability insurance will cover compensation awarded by the court to your employee.
Third-party injury
A third-party claim occurs if your employees accidentally cause injury to a customer in a work setting. Your insurance will cover claims made by the customer, such as legal fees or medical bills. For example, if your employee drops hot water on a customer in your coffee shop and they get burned, your insurance will pay for the customer’s medical treatment.
Third-party property damage
This cover applies if your employees cause damage to a third party’s property while on the job. For example, if your employee damages a client’s laptop beyond repair while doing a presentation, your insurance will pay for repair or replacement.
A good policy should cover you from claims ranging from £5 – £10 million, depending on your industry and company size.
When To Make An Employer’s Liability Insurance Claim
Here are some scenarios that might apply:
- A factory worker suffers a breathing-related illness after being exposed to harmful chemicals
- Construction workers develop health problems after exposure to asbestos
- A builder falls off a broken ladder and breaks a leg
- An office worker falls on a wet floor because there was no warning signage
- You failed to provide staff with health and safety training and an employee injures themself.
Note that employers’ liability insurance will also cover ex-employees who are claiming for compensation. As long as the ex-employee can prove that their injury or illness was sustained while working for you, they can make a claim.
What Other Insurance Types Can You Get For Your Business?
Employer liability insurance cover is a legal requirement, but there are also other types of insurance you should consider:
Public liability insurance
Public liability This insurance protects companies from financial losses due to third-party claims for injury or property damage that occurred due to your business operations.
Product liability insurance
Product liability insurance offers financial protection for costs due to illness, injury or damage caused by the products you sell (even if you don’t manufacture them).
Professional indemnity insurance
Professional indemnity insurance covers claims from losses suffered by your clients due to advice or consultation provided by your company or employees.
Business interruption insurance
Business interruption insurance cover will provide financial protection if you lose income due to an event included in your employers’ liability insurance policy, like a flood or fire.
Business building insurance
If your company operates from business premises, you’ll be covered for damage caused to your building due to an insured event.
Tool insurance
Tool cover protects your tools and equipment needed for business operations if lost, stolen or damaged.
How Much Does Employers’ Liability Insurance Cost?
The cost of liability insurance will differ for each employer, as there are several factors that influence the cost.
On average, employers can expect to pay around £11 per month.
Here are the factors that influence the cost of your employers’ liability policy:
Type of business
Those working in high-risk industries will pay more for insurance. If your employees use heavy machinery or dangerous equipment, they’re more likely to become injured. This will result in higher premiums.
Number of employees
How many employees you have working for you will also influence the cost of your insurance. The more staff members you have, the more expensive it will be to insure them all.
Company turnover
The cost of your insurance is calculated based on your revenue. If you have a high turnover, you’ll be more expensive to insure than a smaller company with lower revenue.
The amount of cover you need
The amount you need to cover will influence the cost. Although you’re legally required to have cover of at least £5 million, insurance policies typically have limits of £10 million. If you need a higher level of cover, the price will increase.
How To Lower The Chances Of Making A Claim
The easiest way to reduce the risk of having to make a claim is to make sure your working environment has stringent health and safety practices. You should also comply with industry regulations and standards.
Equipment should be well-maintained and employees should receive proper training to prevent injury or accidents.
Perform regular risk assessments, especially when employing new staff or purchasing new equipment.
How Can You Reduce The Costs Of Your Employers’ Liability Insurance?
There are several ways in which you can reduce the cost of your employers’ liability insurance premiums:
- Implement health and safety policies: Develop strict health and safety protocols to minimise accidents. Frequently review these policies to ensure they’re up to date.
- Claims history: The less you claim, the lower your premiums will be.
- Active risk management: Regularly review your risk management practices to assess if there are any new risks in your business. Document all your practices to present to your insurer.
- Increase your excess: When you increase your voluntary excess, you’ll lower your premium. Just make sure you can still afford the excess amount when you need to make a claim.
- Compare quotes: Use EasyQuote to help you compare affordable insurance quotes from leading insurance providers.
- Bundle your policies: Consider buying all your different insurance policies (like fleet, property and liability insurance) from a single insurer for a discount.
How To Compare Insurance Quotes With EasyQuote
Comparing employers’ liability insurance quotes with EasyQuote is simple. By providing us with the following information, you can get quotes from leading insurance providers in minutes:
- Tell us about your company and who works for you. This will help us find tailored deals.
- Review the policies you receive to see if they meet your business needs.
- Find the right insurance deal for your company.
Frequently Asked Questions
Employers’ liability insurance covers employers and their companies for compensation costs in the event of an employee (or ex-employee) claiming a job-related illness or injury.
Employers are legally required to have this insurance if they employ staff.
As a minimum legal requirement, your insurance policy must provide cover of at least £5 million. However, many insurance providers typically offer a cover worth £10 million as an industry standard.
The higher the risk of insuring you, the more expensive your policy will be – but you’ll be suitably covered in the event of a claim.
Yes, most UK business owners require this type of insurance. If you’re legally required to have it and you don’t, you could be fined £2,500 per day that you’re not covered.
However, there are some exceptions, like if you employ family members or your staff work remotely in a different country.
If you hire subcontractors, they’re not legally classified as employees, so you might not need insurance.
The amount of employees you can insure depends on which insurance provider and policy you choose.
Just note that there are different rules for insuring subcontractors and contractors:
- Subcontractors: This can be complicated because if the person is subcontracted for labour only, they’ll use work equipment provided by you. This means they will have to be covered as an employee. But, genuine subcontractors may not need to be insured. If you’re unsure, confirm this with the subcontractor before you hire them.
- Contractors: According to the Government Health and Safety Executive, if an independent contractor also works for another company, they may not need to be insured. Individual cases may need to be reviewed, so if you’re unsure, make sure you refer back to your policy, seek legal advice, or talk to your insurer.
Yes, however, it will depend on certain factors:
- Your insurance policy
- The work activities
- The specifics of a claim
Some policies might not cover every employee, or they may only cover certain activities.
Also, be aware that failing to do a risk assessment of your staff member’s environment may render your insurance policy invalid.
What your insurance covers can be a bit of a grey area as it can be hard to work out which illnesses or injuries happened because of your employee’s work.
As the employer, you may also not be responsible for the physical aspects of your worker’s environment, such as ventilation, infrastructure safety and design, and fire evacuation.
You’ll need to refer back to your policy to confirm what is covered and what isn’t. In normal circumstances, all workers will be covered, but this may not be the case for people working from home.
As for direct family members and overseas workers, you’re not legally obligated to have insurance in place. But, you should still take steps to ensure good health and safety standards to avoid nasty accidents and potential claims.
All three insurance types protect businesses from financial losses due to claims from third parties, but they cover different scenarios:
- Employers’ liability insurance: It safeguards businesses against compensation claims from employees who suffered injuries or illnesses while at work. It covers legal defence costs as well as compensation payouts awarded to the employee.
- Professional indemnity insurance: This protects your company if you provide services or advice from claims of professional negligence or omissions made by employees. Professional services like accountants or consultants should buy this insurance.
- Public liability cover: This protects a business from claims from members of the public if your work or employees accidentally injured them or caused property damage. It is a must for businesses that regularly interact with members of the public, like restaurants or retail stores.
Not every accidental scenario is covered by your employers’ liability insurance. Here are some of examples of what is excluded:
- The injury or illness was deliberately caused.
- Injuries that are sustained while travelling
- Offshore employees
Always carefully review your policy documents so you know what is excluded.