Here we will provide an analysis of Employers’ Liability Insurance (EL) – one of the main types of business insurance. Most employers have to purchase EL as a legal requirement due to Government legislation. The cover is designed to cover claims made in respect of injury or illness caused to employees due to their work.
What does Employers’ Liability Cover?
Employers’ Liability covers claims made by employees for work-related injuries and illnesses - EL can pay out the legal costs and compensation amounts.
An example of an EL claim would be where an employee trips over a cable in an office which was left trailing. He then suffers an injury which allows him to make a claim against his employer. The court in this situation could order the employer to make a compensation payment to the employee, which could then be paid out via the insurance provider.
Another example could be asbestos exposure or an outdoor instructor being injured from a faulty piece of equipment supplied by the employer.
Do businesses need Employers’ Liability?
The Employers’ Liability Act 1969 states that many types of business are required to purchase EL depending on their set-up – making EL a legal requirement in many cases. This could range from Ltd companies to sole traders and PLCs. There are also some exemptions such as family businesses where all of the employees are close relatives i.e. husband, wife, father, mother etc. Generally, if you’re unsure whether you fit into a certain category or not, it is worth purchasing an Employers' Liability policy as court compensation costs for employee related claims can often be high.
A fine can also be placed upon businesses who do not have employers liability insurance in place. Hence further enforcing the need to make sure that this cover is in force for your business.
More guidance for employers can be found here http://www.hse.gov.uk/pubns/hse40.pdf.
Who counts as an employee?
The definition of an employee can be complex in certain situations. In most cases, an employee is someone who the business pays wages to and deducts National Insurance contributions and Income Tax from them, they also provide the tools they need to do their job, such as a computer and desk. Bona-fide sub-contractors generally do not fall under the bracket of an employee as they are a separate business and have their own insurance and tools. On the other hand labour-only sub-contractors can often fall under the definition of an employee as they may not have their own insurance and use your business' tools for the job, while also being under your guidance/instruction. It’s important to check the legislation along with having a discussion with your insurance broker who should be able to advise accordingly.
You will need Employers' Liability in the following circumstances:
Part time employees
Temporary placements or work experience / student placements
Even if you only have one employee in the business
You do not need Employers' Liability if:
You work alone and are self employed
You do not employ anyone
How much does it cost?
The cost of Employer’s Liability varies greatly depending on your industry and how many employees your business has. For example if your business is a canoe school which only has 1 employee, the cost for EL would be a lot lower than a activity centre with 20 employees. The cost depends on the claims experience within a certain sector. The higher the risk, the more expensive the insurance will be.
What limit of indemnity do I need?
For Employers’ Liability, the legal requirement is £5,000,000 worth of cover, however it is general practice that most insurers provide a £10,000,000 limit of indemnity. The EL policy will pay compensation up to the limit stated on your policy.
You can purchase Employers Liability from us at Activity Business Cover, along with other covers such as Public Liability and Buildings / Contents. Please feel free to contact us by clicking here or call us on 01707 902 400 to speak to an advisor.