What is employers’ liability insurance?
Employers’ liability insurance is there to protect you and your business against compensation costs, should an employee suffer an illness or injury as a result of their employment with you. If your business employs more than one person, then having employers’ liability insurance is a legal requirement.
As a minimum, businesses should have £5 million in cover, and a fine of £2,500 a day could be charged for every day you are uninsured.
Who needs employers' liability cover?
Employers' liability Insurance is required by law and in general, you will need it for someone who works for you if:
- You deduct at source National Insurance contributions and Income Tax from the money you pay them.
- You pay them on a per hour, per day, per week basis.
- You supply most of the equipment’s and materials.
- You require the person only to deliver the service and they cannot employ a substitute if they are unable to do the work.
Who is exempt?
A limited company where only 1 person is employed and that person also owns more than 50% of the share capital.
A company which is not limited and has only 1 employee (sole trader) who is the principal of the business.
A company which is not limited and of more than 1 employee where employees are close family members.
Partnerships where the directors are equal partners in the business and do not employ others.
Family members that work for you do not need to be added to an employers' liability policy, however part-time workers and temporary staff do. Typically employers' liability insurance covers you for up to £10 million and you must purchase a minimum cover level of £5 million.