Employer's liability insurance – a legal requirement for most businesses

As an employer, you are responsible for the health and safety of your employees when they’re at work. And though nobody likes to think that an employee would make a claim against them, if they have a serious accident or fall ill as a result of their work, they may have no choice but to try and seek compensation from you. It’s at times like this that insurance is essential and not having it can leave you and your business in a very vulnerable position.

Essentially, employer’s liability insurance covers you against these types of claims and means that neither you nor your business have to cover the costs of medical fees or legal expenses arising as a result of the claim. Most businesses are required by law to have this type of insurance and you may be prosecuted under the Employers Liability (Compulsory Insurance) Act 1969 ECLA if you don’t have it. Some exceptions include certain types of family business and also health service bodies where employees are exposed to greater risks by the very nature of their work. If you would like to find out more about the act and what types of businesses are exempt you’ll find a really helpful guide at www.hse.gov.uk/pubns/hse40.pdf which gives full details and also explains in full what type of person counts as an employee. For now, here is a brief summary of the definition of an employee:

  • Someone who is under a contract of service
  • You control how and when they work
  • You deduct income tax and National Insurance contributions from the salary you pay them

When you take out employer’s liability insurance with a provider they will issue you with a certificate. You’ll need to have this on display on a notice board where all your employees can read it.  Alternatively you can choose to have it displayed electronically, for example on your company’s intranet. You’ll also need to make it available to members of the Health and Safety Executive if they request it on a visit, and if you don’t have it you can be fined up to £1,000. Added to this is the fact that you can be fined up to £2,500 for each day that you don’t have employer’s liability insurance, so as you can see, trying to save on this premium could cost you a lot more in the long run. One more key thing to bear in mind is the importance of keeping your certificates and records for as long as possible. This is because some illnesses will only become apparent decades after they have been contracted, and if you don’t have records going back this far, you may not be covered.

The legal minimum amount for employer’s liability is £5 million worth of cover but often your local council will dictate what the minimum requirement for your area is, so it’s best to check first.  If the council’s dictate is £10 million then you’ll need to shop around for a provider who will offer this level of cover. It’s also worth bearing in mind that not all business insurance policies will include it as standard, so do check before you buy. If it’s not included in the policy then you will be able to purchase it as an optional extra. Your premium will depend on a number of factors including things like the nature of your business, the number of employees you have, the size of your payroll, your risk management practices, and whether or not any employees have made claims against you in the past. Providers will also look carefully at your health and safety procedures and the training you offer employees, particularly when the work is considered dangerous and there is a real chance they could injure themselves while on the job. If you haven’t yet got employer’s liability insurance, then start looking now, or you could find yourself faced with a hefty fine, or worse still a hefty compensation bill.