Employers’ liability insurance is a type of insurance that covers businesses if their employees or ex-employees develop a work-related illness or get injured on the job and make a claim against them. It is a must for many businesses, but not all companies need it.
Employers’ liability insurance covers legal costs, medical costs, lost income, and possible court-ordered compensation. The latest version of the Employers’ Liability Act states that businesses, groups, and individuals that employ staff must hold a minimum of £5m in employers’ liability insurance.
This insurance is necessary for businesses that employ staff, including those who work from home. The Employers’ Liability Certificate must be on display to show employees that the company holds this cover.
Companies that do not have employers’ liability insurance can face serious consequences, including prosecution if a claim is made against them. A report found that 74 per cent of SMEs are underinsured globally, which could lead to difficulties in getting insurance coverage again in the future.
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Employers’ liability insurance can be purchased through insurers or intermediary services such as brokers or trade associations. It may also come as part of an insurance package. When shopping for this insurance, it is essential to compare quotes and check the register on the Financial Conduct Authority website to ensure the insurer is legitimate.
Displaying the Employers’ Liability Certificate where employees can see it is also essential, either in a staff room or digitally on a company intranet. Failure to do so can result in a fine.
For subcontractors and freelancers, the rules are murky, and the level of control the business has is the defining factor. If a subcontractor works exclusively for the business, is treated like other staff, and has national insurance and income tax deducted, employers’ liability insurance is likely required.
However, if a subcontractor supplies their own materials and equipment, is in business for personal benefit, and can employ a substitute, employers’ liability insurance is probably not necessary. Businesses must understand the rules and regulations surrounding this insurance to avoid prosecution and ensure they have the necessary cover in place.
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A cautious approach to employers’ liability insurance is essential, as the consequences of not having it can be severe. By understanding the requirements, businesses can protect themselves and their employees from work-related illnesses and injuries.
Jordan Gregg, group underwriting director at Cedar Underwriting, states that companies can face prosecution if they do not have employers’ liability insurance when it is legally required.
Businesses can check the Financial Conduct Authority’s register of authorised insurers to ensure their insurer is legitimate and avoid breaking the law by using an unauthorised insurer, which is available on the Financial Conduct Authority website.
