Do I Need Employers’ Liability Insurance?

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Almost anyone who hires a member of staff to work for them needs employers’ liability insurance. Employers’ liability insurance is a legal requirement that not only protects workers but also the business or organisation. This insurance is all about making sure a worker can be properly compensated if they were to sustain an injury or die as a result of the job they do. It not only adds to an employee’s peace of mind they are being safeguarded, but it also prevents a business or charity from going under if they are faced with a potentially multi-million pound pay out.

However, not every business needs to hold employers’ liability insurance for their staff. And while the law stretches far beyond a permanent, full-time member of staff, there are a few exceptions when employers’ liability insurance is not needed.

For the avoidance of doubt, an organisation probably needs employers’ liability insurance if they:

  • Provide equipment and materials.
  • Deduct national insurance and income tax from the worker.
  • Sets the hours and location an employee works.
  • Does not allow work to be subcontracted.
  • Offers the same work conditions for the same work as other employees who do qualify for employers’ liability insurance.
  • Demand a share of the profits.

However, they probably don’t need employers’ liability insurance if the worker:

  • Uses their own equipment and materials to carry out the work.
  • Operates as a business and does not have income tax and national insurance deducted by the employer. However, if the worker is classed as self-employed for their own tax benefits but is treated the same as other members of staff, they still require employers’ liability insurance.
  • Chooses their own hours and location of work and can subcontract work out.
  • Is a close family member. This rule does not apply in limited companies. The Health and Safety Executive defines a close family member as either a: husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister.
  • Is based abroad and is not in Great Britain for more than 14 consecutive days, or more than seven on an offshore location.

This guidance aside, ultimately, it is the responsibility of the business to decide if it needs employers’ liability insurance. A business owner who is unsure can discuss the situation with a specialist business insurance broker or insurance company to help them decide whether or not coverage is needed.

Employers’ liability insurance is so important the government can issue a £2,500 fine for every day a business is without it. Even failing to display the insurance certificate in a visible place for workers to see can bring about a £1,000 fine.

Do you need employers’ liability insurance for volunteers?

The law on employers’ liability insurance for volunteers is vague, but there are two reasons why it is probably a wise idea. Firstly, if a volunteer is injured or worse dies while working, they or their family can sue the organisation for compensation. Second, the law states businesses or charities should have a minimum cover of £5 million, showing just what is at stake if an incident occurs.

Secondly, any organisation has a moral obligation to safeguard their staff, whether they are paid or volunteers.

Charities, in particular, depend on voluntary workers, and therefore with so many unpaid workers, the risk is greater without employers’ liability insurance covering them.

Specialist charity insurance policies state its employers’ liability insurance covers volunteers. Meanwhile, standard employers’ liability insurance with other business insurance providers can have different terms. Direct Line, for example, state volunteers are covered automatically under their policy, but this may not be the case for everyone. And for organisations that take on a volunteer without already having a paid member of staff covered by employers’ liability, Direct Line says a new policy will be needed.

If an organisation already has an employee covered by employers’ liability insurance before taking on a volunteer, it is best to check that the volunteer is protected with their provider.

Do I need employers’ liability insurance as a director?

A director of a business often does not need employers’ liability insurance; however, this is not a straight yes or no. As with many insurance products – it depends!

Limited companies with a director that owns more than 50% of the business and does not have any other employees do not need employers’ liability insurance. This is also the case for self-employed or working in an equal partnership with no employees.

While close family members are exempt from employers’ liability insurance, this rule does not apply to limited companies.

If there is more than one director of a business, then employers’ liability insurance is needed. And if a person has been hired as a company director, then yes, they will also need to be covered by employers’ liability insurance.

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