All UK businesses need employers’ liability insurance under the conditions of the Employer’s Liability (Compulsory Insurance) Act 1969. Businesses with employees must obtain this insurance according to the Employer’s Liability (Compulsory Insurance) Act 1969.
All types of businesses including sole traders small business owners and global organisations must secure Employers’ Liability Insurance according to legal requirements.
Insufficient employers’ liability coverage leads to mandatory financial penalties. The lack of an insurance policy might result in daily fines reaching up to £2,500.
This guide will provide instructions to identify when Employers’ Liability Insurance in the UK is necessary for your business.
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What is the Employers Liability Insurance?
Employers’ Liability Insurance gives protection to your business. It pays for compensation claims employees make when their health suffers because of workplace conditions that stem from employer negligence.
The Employers’ Liability Act 1969 mandates employers to carry liability insurance. The insurance exists to safeguard employees who sustain injuries or develop illnesses because of their work duties.
The insurance covers specified compensation payments and medical fees together with legal costs that a present or former employee can receive following workplace-related illness or injury.
The compensation amount, together with legal expenses for employee claims of work-based illnesses or injuries, can be paid through employers’ liability insurance.
Is Employers’ Liability Insurance Compulsory?
Yes—if you have staff. Workplace injuries find their way to employees regardless of their precautionary measures. Occupational diseases often lead to compensation claims that emerge after many years have passed.
Employers’ liability insurance will pay for compensation benefits along with legal expenses when you hire any staff member regardless of duration. Employers must secure this insurance because it is commonly required by law.
A business without employers’ liability insurance will suffer tremendous costs that extend beyond compensation claims. Every day of non-insurance exposure results in a £2500 fine when you employ any member of staff, including volunteers, under your organisation.
What Does Employer’s Liability Insurance Cover?
The most covered items under the employer’s liability insurance include:
- Employee discrimination against age groups and racial backgrounds as well as sexual characteristics and various disabilities.
- Third-party lawsuits (the manufacturer of the ladder may initiate a lawsuit against the employer if one of their workers suffers an injury from ladder usage at work).
- The insurance covers legal actions that family members start to recover damages after their deceased or disabled worker passes away.
- Family members who provide medical care to sick workers may file bodily injury lawsuits when they get injured as a result.
Does Every Limited Company Require Employers’ Liability Insurance?
The insurance requirements for businesses follow various categories, while each company operates differently from others. Here’s a guide to the rules:
Contractors
Employers’ Liability Insurance becomes necessary for contractors who directly employ additional individuals.
Businesses do not need to get Employers’ Liability Insurance when hiring independent contractors who maintain work relationships with multiple organisations.
Insurance coverage for such freelancers becomes unnecessary because they prove their independent business operation.
Subcontractors
Employers’ Liability Insurance should be obtained for subcontractors who work as labour-only staff.
Assess the need for employers’ liability insurance for subcontractors by determining whether your subcontractors could finish the work without having to find another person.
The insurance policy may not be needed in this situation.
Part-time Employees
Part-time staff require Employers’ Liability Insurance similar to how full-time staff need this coverage.
Any self-employed person who hires temporary help for their workload needs to obtain a policy regardless of how much time the helper spends on the job.
Volunteers
The insurance coverage called employers’ liability protects volunteers and employers treat them like other staff members.
This includes volunteers who are:
- Unpaid students
- Youth training programs in which students participate
- Students participate in work experience training under an official program.
The majority of these groups receive protection through the standard employers’ liability policy of the company.
You must seek legal counsel about your situation regarding legislation if you lack any other staff or employers’ liability protection.
The Health and Safety Executive (HSE) provides additional information about this topic through its external link.
Temporary Employees
Employers’ Liability Insurance becomes necessary whenever your organisation uses temporary employees.
Employers’ liability insurance should cover every temporary worker no matter what their role or duration of employment, such as interns, event personnel, and fixed-term contract employees.
The law considers every employee on the same level regardless of the duration of their employment.
Apprentices
All apprentices in the UK must have employer liability insurance coverage according to legal requirements. All apprentices who work at Level 2 through Level 7 are required to maintain an insurance policy.
The best practice is to verify employee situations before starting work at your business when there are potential ambiguity factors involved.
You do not require employers’ liability insurance when you refrain from deducting income tax or national insurance from an employee’s pay. Employee status goes beyond single factors because a worker classified as self-employed may have employee characteristics in other aspects.
Your employee or helper remains vulnerable to health risks from their employment duties even if exemptions exist. These parties could initiate legal action even if they suffered sickness or injuries. Your business faces financial dangers when proper insurance coverage is absent.
Who Does Not Need Employers’ Liability Insurance?
A few companies exist outside the legal requirement to possess employers’ liability insurance coverage.
These are:
- Most public organisations, such as the armed forces
- Health service bodies, such as the NHS
- Public fund-based organisations fall under this exemption category.
- Family businesses that only employ close members of the family
- A sole-employee business is exempt from this insurance requirement unless the client demands to apply or your ownership percentage in your limited company does not exceed 50%.
Benefits of Employer’s Liability Insurance
1. Caring for Employees
Employee welfare stands as a fundamental responsibility that employers must show towards their workforce.
Workplace happiness, together with safety, creates psychological advantages because content workers at secure workplaces experience improved mental health and increased work efficiency.
2. Coverage for Lost Wages or Medical Bills
Worker’s compensation funds exclude coverage of multiple types of incident-related expenses.
Employers can protect themselves from sudden massive financial losses through claims that workers’ compensation funds would not cover via liability insurance policies.
3. Coverage for Legal Fees
The cost of employee legal fees adds up at the same rapid pace as employee bills and lost wages.
Employee liability insurance extends employer protection against financial costs beyond what workers’ compensation policies provide.
4. Demonstrates Law-Compliant Behaviour in a Consistent Manner
Law protection requires proof of compliance. Participation in the provincial workplace compensation fund and employer’s liability insurance demonstrates an employer’s trustworthy nature.
The insurance boosts their reputation because individuals choose to work for organisations that strictly follow rules and regulations.
Conclusion
To sum up, most businesses that work with employees must obtain Employer’s Liability Insurance by law. The requirement for insurance coverage does not apply to family members, but it means you will need to pay out in case of a lost claim.
It serves as protection for employees against injuries along with illnesses and fatalities that happen during work activities. Employers bear legal responsibility to maintain worker safety throughout their work shifts and within workplace premises.
Most business locations do not exist without some risk of workplace injuries or fatalities. In such situations, this insurance can protect you from financial losses.
