Employers Liability Insurance

Insuring the business against claims and calamities

What is Employers Liability Insurance?

For almost all businesses, Employers Liability Insurance, also known as simply Employers Insurance, is a compulsory insurance that a business must have to be protected from claims from employees.

Employers Insurance is an essential product that allows businesses to meet the costs incurred by legal fees and damages of employees who are injured or made ill at work through the fault of the employer. It is the right of any employee to seek compensation if an employer has been negligent. Employees can still seek this compensation if a business goes into liquidation or receivership.

Why is Employers Insurance necessary?

The reason why Employers Insurance is compulsory for the majority of businesses is to protect the employees from suffering illness, financial loss and injury as a result of their work. Claims being made by an employee against a company can prove to be very expensive endeavours, and Employers Insurance forms part of the law to ensure that businesses can meet the costs of any claims.

Employers are responsible for the health and safety of their employees while they are at work. It is a fact of life that some employees will unfortunately become ill or injured as a result of working for their employer. If this happens, then an employee may try and claim compensation from their employer if they believe they are at fault for the illness or injury.

For employers, it is a legal requirement to have Employers Insurance, with exceptions for only a few types of business. Any failure to have relevant Employers Insurance that complies with the law can result in a business being fined. These fines can be hefty, with the law allowing a fine of up to £2500 per day that a business does not have appropriate Employers Insurance.

What businesses are exempt from compulsory Employers Insurance?

Employers Insurance is compulsory for almost all types of business. However, if a business is not a limited company and there is only one employee in the business, or the business only employs close family members, then Employers Insurance is not compulsory.

There are also exemptions for limited companies that have only one employee, as long as that employee also owns at least 50% of the share capital in the company.

What constitutes an employee?

In general, somebody can be defined as an employee of a business if:

• the business deducts National Insurance and Income Tax from the salary that is paid
• the business controls how an employee works, when they work and where they are working
• the employee cannot employ a substitute when they are unable to work
• the employee is under a contract of service to the business.

To clarify what constitutes as an employee and to offer appropriate cover for businesses, the majority of Employers Insurance policies that are available will contain a broad definition of employee that should cover most circumstances.