All businesses have a legal obligation to provide safety to their employees at work premises. Employees’ injuries and illness as a result of negligence will require compensation. Business owners are responsible for their negligence and that of their employees. Compensation can be financial for expenses incurred in loss of present and future earnings, and pain. Even if the injury or illness was due to the employee’s negligence, the employer is still liable under common liability clause.
What is an Employer’s Liability insurance?
It is a business insurance cover that protects your business against financial loss as a result of injuries or illness of employees in the course of their employment. The insurance policy ensures that employers can meet the cost of settling such claims. The law requires the employers to have employer’s liability insurance for people in their employ.
The following employers are exempt:
• Health service bodies like National Health Service trusts, Health authorities and Scottish Health Boards.
• Public organisations including police authorities, local authorities, most government agencies, and nationalised industries
• Family businesses except those incorporated as a limited company
• A sole proprietorship.
Who is an employee?
There are no rules regarding who an employee is for employers’ liability insurance. The nature of your contract with them will determine whether you need to take insurance. Employer’s liability insurance is mandatory if, as their employer:
• You deduct from their national salary insurance and income tax.
• You assign duties and give instructions on the work procedure.
• You provide equipment and materials for the job. You enjoy profits the workers make; you will also be responsible for the losses.
• You expect the person in your employ to deliver the service and they won’t get a substitute if they cannot perform their job.
You may not be required to provide liability insurance as their boss if:
• They work as an independent contractor.
• They use their equipment and material to complete a task.
• They are in business to make their profits.
• If they are unable to do the job, they can hire a substitute.
• You make no deductions from their pay.
Generally, an employer may not need insurance for volunteers and students who work for them unpaid. However, you should consider the level of risk they may be exposed to and talk to your insurer on how to cover them. You may need to take out insurance for domestic workers if they work for you exclusively.
Who can sell me the employer’s liability insurance?
Take out your policy with an authorised insurer to avoid breaking the law. An unauthorised insurer may give you problems during compensation. Authorised insurers work under the terms of Financial Services and Markets Act 2000. Search an insurer on the Financial Service Authority register to ascertain their legality.
How much employers’ liability cover do I need?
All companies must take an insurance cover of at least £5 million. However, a business should evaluate its risks and liabilities and decide the amount of insurance cover to take. Most insurers have a standard cover of £10 million inclusive of cost and expenses. The amount of protection you require depends on the nature of business and number of employees. Policies often extend to include the legal fees and prosecution cost awarded, in the event criminal proceedings are levelled against you and your employees.
If a business is a subsidiary of a larger company or is part of a group, the employer’s liability policy can belong to the whole group. Therefore, the group, including its subsidiaries must have a cover of £5 million.
What is the importance of employer reference number?
Businesses are receiving employer reference numbers by HM Revenue and Customs. It identifies employers for national insurance and tax purposes. An employer reference number is necessary when purchasing employers’ liability insurance. In case of a claim, the reference number shows all the companies the employee has worked for and acts as proof that the business had insurance in place at the time of the claim.
Will the insurer make me pay part of the claim?
The insurer must cover the full amount of compensation agreed upon or recommended by the court. You can reach an understanding with the insurer to pay part of the settlement that they have paid to your employee. When taking out the insurance policy discuss with the insurer on specific instances in which they will pay. These conditions should be unique to your business activities.
What if the employer’s liability insurance is not in place?
The Health and Safety Executives (HSE) ensures every employer abides by the law on employers’ liability insurance. Employers can attract a fine of £2500 for every day that they do not have insurance. Also, employers must display a certificate of insurance at the business premises or produce on demand. Failure to show the certificate could attract a fine of up to £1000.
What should you consider when purchasing employers’ liability insurance?
• Consider the risks- if an accident causes injury to your staff you will be liable for damages worth thousands of pounds. Apart from employees’ welfare consider the effect a claim could have on your business.
• Ensure all the requirements of your company are present in the employers’ liability cover. Read the terms and conditions thoroughly.
• When seeking advice from an insurance expert be honest and reveal all your business risks to get a comprehensive cover.