FAQ: Employers Liability
Questions
- What is employers’ liability insurance?
- Do I need employers’ liability insurance for all the people who work for me?
- When would I be exempt from the Employer’s Liability Act?
- How is the cost of my Employers’ liability calculated?
- How can I lower the cost of my Employer’s Liability insurance?
- What does Employers’ liability insurance cover me against?
- If I hire a sub-contractor am I liable for their Employer’s Liability Insurance?
- How much cover for Employer’s Liability Insurance do I need?
- If I run a company when wouldn’t I need Employer’s Liability Insurance?
- Who is responsible for checking that I’ve got Employer’s Liability Insurance?
- What will I need to show the Health and Safety Executive?
- Does my Employer’s Liability Insurance cover me to take on work experience placements?
Answers
What is employers’ liability insurance?
Whilst your employees are at work, you are responsible for their health and safety. 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 ensures 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.
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 insurance for people who you employ. However, people who you normally think of as self-employed may be considered as your employees for the purposes of employers’ liability insurance.
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 of 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 degree of control you have over the work they do.
There are no hard and fast rules about who counts as your employee for the purposes of employers’ liability insurance. The following paragraphs may help give you some indication. However, if you have any doubts you should seek legal advice.
In general, you may need employers’ liability insurance for someone who works for you if:
- 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
- Your supply most 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. Similarly, you will be responsible for any losses.
- You require that person to deliver the service and they cannot employ a substitute if they are unable to do the work.
- They are treated in the same way as other employees, for example, if they do the same work under the same conditions as someone you employ.
In general, you may not need employers’ liability insurance for people who work with you if:
- 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 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
In most cases you will not need employers’ liability insurance for volunteers. Although, in general the law may not require you to have insurance for:
- Students who work for you unpaid
- People who are not employed, but taking part in a youth or adult training programme
- A school student on a work experience programme
It is advisable to inform your insurance company if you take on:
- Volunteers
- Students who work for you unpaid
- People who are not employed but are taking part in youth or adult training programmes
- School children on work experience programmes
You may require insurance cover for any of the above and should bear in mind the level of risk they may be exposed to during the time they are working for you. It may be necessary for you to carry out a separate risk assessment or take special measures for those listed above.
Health and Safety Executive
If you are unsure whether you are liable for a subcontrators employers’ liability insurance please contact Commercial Plan Insuranceand one of our experienced staff will be able to assist you.
When would I be exempt from the Employer’s Liability Act?
You need employers’ liability insurance unless you are exempt from the Employers’ Liability (Compulsory Insurance) Act. The following employers are exempt:
- Most public organisations including government departments and agencies, local authorities, police authorities and nationalised industries
- Health service bodies, including National Health Service trusts, health authorities, primary care trusts and Scottish Health Boards
- Some other organisations which are financed through public funds, such as passenger transport executives and magistrates’ courts committees
- Family businesses, ie if your employees are closely related to you (as husband, wife, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister). However, this exemption does not apply to family businesses which are incorporated as limited companies
- Companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company
Health and Safety Executive
If you are unsure whether you are liable for a subcontrators employers’ liability insurance please contact Commercial Plan Insurance and one of our experienced staff will be able to assist you.
How is the cost of my Employers’ liability calculated?
The cost of your Employers’ Liability Insurance premium – is typically worked out using a book rating. A book rating is calculated using a base rate.
The base rate is also calculated on the insurer’s estimate of the level of risk attached to a particular business or industry area. The premium will be affected by factors such as your claims history, the size of the perceived risk and your approach to risk management.
For employers’ liability insurance,the exposure risk is assessed on the basis of the number of employees and the size of the payroll. In addition, there are other initiatives that influence how risk is assessed.
How can I lower the cost of my Employer’s Liability insurance?
The first thing you need to do is lower the amount of risk you present to the insurers. The safer your working environment and the fewer claims you have made, the lower your risk will be.
Next you need to start the time consuming job of shopping around. Fortunately Commercial Plan Insurance will do that part for you. At Commercial Plan Insurance we deal with several liability insurers. We will find you quality liability insurance at a low cost.
What does Employers’ liability insurance cover me against?
Employers’ liability insurance, enables businesses to meet the costs of compensation and legal fees for employees who are injured or made ill at work through the fault of the employer. Employees injured due to an employer’s negligence can seek compensation even if the business goes into liquidation or receivership.
The NHS can also claim the costs of hospital treatment (including ambulance costs) when personal injury compensation is paid.
If I hire a sub-contractor am I liable for their Employer’s Liability Insurance?
By law, as an employer you must have employers’ liability insurance,. However, someone is defined as your employee if:
- you deduct National Insurance contributions and income tax from the salary you pay them
- you control when, where and how they work
- they cannot employ a substitute when they are unable to work
If you are unsure whether you are liable for a subcontrators employers liability please contact Commercial Plan Insurance and one of our experienced staff will be able to assist you.
How much cover for Employer’s Liability Insurance do I need?
By law, an employer must be insured for at least £5 million worth of Employer’s Liability Insurance. Most insurers automatically provide cover of at least £10 million. Employers’ liability insurance must cover all your employees in England, Scotland, Wales and Northern Ireland.
If I run a company when wouldn’t I need Employer’s Liability Insurance?
If your business is not a limited company, and you are the only employee or you only employ close family members, you do not need compulsory employers’ liability insurance,. Since February 2005, limited companies with only one employee, where that employee also owns 50 per cent or more of the issued share capital in the company, have also been exempt from compulsory employers’ liability insurance.
Who is responsible for checking that I’ve got Employer’s Liability Insurance?
The Health and Safety Executive is responsible for enforcing the law on employers’ liability insurance,. You can be fined up to £2,500 for each day that you do not have appropriate insurance.
What will I need to show the Health and Safety Executive?
When you take out a policy you will receive a certificate of employers’ liability insurance. You must display a copy of this where employees can easily read it and keep copies for at least 40 years or risk a fine of up to £1,000. You will need to make these certificates available to health and safety inspectors on request.
Does my Employer’s Liability Insurance cover me to take on work experience placements?
In most cases you will not need employers’ liability insurance for volunteers. In general the law may not require you to have insurance for:
- Students who work for you unpaid
- People who are not employed, but taking part in a youth or adult training programme
- A school student on a work experience programme
However, you may require insurance cover for any of the above and should bear in mind the level of risk they may be exposed to during the time they are working for you. It may be necessary for you to carry out a separate risk assessment or for you to take pre-cautionary measures.
If you are unsure about any matter relating to your employers’ liability insuranceit is advisable to call Commercial Plan Insurance.Our friendly informed staff will be only too willing to help.