How much Employer’s Liability Cover should you have?

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If you employ anyone, you are likely legally compelled to hold the type of cover known as employer’s liability insurance. This requirement is enshrined in the Employers’ Liability (Compulsory Insurance) Act 1969, but exactly how much of this cover you need can remain very much its own question.

In truth, the answer can depend on a wide range of factors, which we will detail in this article. Whatever the precise requirements in your case, you need to heed them; otherwise, you could find your firm significantly out of pocket, and not just due to possible compensation claims from workers.

What is the purpose of employer’s liability cover?

While working for you, your employees could be exposed to various risks. The exact risks depend on the sector – but, if your workers, either current or former, develop an illness or injury directly resulting from work they have carried out in your employment, you may need to pay compensation.

However, this is not to say that the compensation payment would have to come directly from your own pocket. Instead, employer’s liability cover could meet the cost – whether the injury or illness was incurred on-site or off it. In this way, the cover can help to shield your business financially.

Do you legally need employer’s liability cover?

This is an interesting question, as the Employers’ Liability (Compulsory Insurance) Act 1969 does allow some exceptions to the usual stringent requirements for many firms to hold the cover.

If you are an employer in a trade, you are likely to need the cover unless you run a non-limited company where all of the employees are related closely to you, the business owner, or your firm is one where you are the sole employee and own at least 50% of its issued share capital.

Do you need the cover for everyone who works for you?

The law only insists on you holding employer’s liability insurance if you employ people under a contract of service or apprenticeship. It does not matter whether the contract is spoken, written or implied or whether you would typically call the person in question employed or self-employed.

If you are struggling to discern whether a particular worker warrants employer’s liability cover, you should investigate whether that worker satisfies a list of particular criteria cited by the Health and Safety Executive. For example, if you are entitled to control a worker’s productivity habits and whereabouts as well as supply their materials and equipment, you may indeed need the cover.

However, the same legal necessity of employer’s liability cover might not apply if the worker does not work solely for you; for example, because they are an independent contractor. Neither might it be needed if that worker supplies the majority of the materials and equipment needed for the job.

There’s also a particular point worth making when it comes to income tax or national insurance. If you deduct both from what you pay that person, employer’s liability might be legally required. Even if you don’t because that worker is self-employed for tax purposes, this cover may still be necessary.

What if your workers are based abroad, or the company itself is? In Great Britain, employer’s liability insurance from a UK provider would not be necessary for employees based abroad, such as those on secondment, though you should still check what the foreign country’s own law requires.

Employer’s liability cover of UK origin would still be needed for employees who, though typically based abroad, spend over 14 days continuously on Great British land or over seven days on an offshore installation in Great British waters.

What exact level of cover do you need?

If you have determined that employer’s liability cover is indeed necessary for you, the policy must be fetched from an authorised insurer and cover you for a minimum of £5 million, says the UK Government’s website. Falling short of these needs could, ultimately, see you fined £2,500 daily.

For this reason, forgoing the cover can financially sting your business – but even meeting these bare requirements might not suffice for saving your firm from a costly fate. Your own risks and liabilities could make it practically worthwhile for you to take out insurance cover of over £5 million.

Fortunately, at Tradesman Saver, the standard level of employer’s liability cover that we offer is £10 million. We even allow you to extend this cover to account for working partners or temporary staff; that could come in particularly useful during seasonal periods of high activity for your business.

Rest assured that, if you run only a small business, £10 million of employer’s liability cover should more than suffice for it, says Bytestart.co.uk. However, you probably won’t be surprised to know that, the higher level of this cover you choose, the more you will need to pay for it.

At Tradesman Saver, we make it easy for you to compare various options for employer’s liability cover. We offer it as part of comprehensive packages for various types of trade insurance, including builders insurance – please phone us on 0800 121 8748 to learn much more on this point.

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*Based on £1,000,000 public liability, £250,000 legal expenses & £10,000 accidental death cover for a sole trader © Copyright 2019 Tradesman Saver | Tradesman Saver is a product of Henry Seymour & Co (Barkdene Ltd) which is authorised and regulated by the Financial Conduct Authority.Registered in England No 1842617 Insurance Brokers. All rights reserved.
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