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Who needs employers liability insurance?

One of the questions we’re regularly asked is just who needs employers liability insurance and under what circumstances?

Here is a quick overview of the area but at GSI-Insurance we recommend you take this matter very seriously. Legally, you can be fined £2,500 per day for every day you do not have this cover in place. This is something the authorities treat as a major infraction of employment law.

What is employers liability insurance?

Broadly speaking, your company should have in place a number of different types of business insurance but they can be seen as coming under three general headings:

  • covering your legal and financial liabilities to outside parties, such as the general public or your customers. That might typically include things such as professional indemnity insurance, public liability insurance and product liability insurance;
  • protecting your financial assets. That might cover things such as your buildings and contents insurance;
  • insurance relating to your legal liabilities to your employees. This is where employers liability insurance resides.

Employers liability policies typically cover you against the costs associated with one of your employees being injured while they’re performing their legitimate duties on your behalf. For example, an employee who slips on oil on your premises while cleaning it may have a legal right to compensation from you.

What constitutes legitimate duties?

If there is a dispute, the exact qualifying circumstances might be resolved by a tribunal or court. As a very rough guide though, legitimate duties might include situations such as:

  • sustaining injuries on your work premises while working;
  • being injured while elsewhere if they were working on your behalf (e.g. delivering or collecting).

By contrast, if an employee is injured on their own time, typically the liability would not be yours. An example might be if they fell over while shopping during their lunch break.

Is this insurance cover mandatory?

In almost all cases, yes it is. There are a few a very rare exceptions but don’t assume you’ll come into such a category unless you’ve had expert official confirmation.

The law applies even if you only have a single person designated as an employee.

What exactly is an employee?

In many cases, there is no ambiguity. If someone or some people are working for you under a contract, then they’re an employee.

However, in our experience, some business owners mistakenly believe some of the following myths:

  • someone isn’t an employee unless they have a written contract. This is simply wrong under law. Verbal requests for someone to do something on your behalf can be a binding contract of employment. So-called “casual” and part-time arrangements can be likewise;
  • sub-contractors aren’t employees. The law here is complex but in some cases a court might consider them to be so if they’re injured working on your behalf. A lot depends upon how they have structured their company and how formally registered it is but do not make dangerous assumptions about subbies not requiring cover;
  • volunteers doing a favour don’t count as employees. In fact, the law might well say they are, depending upon the exact circumstances;
  • my business is too small to be considered as having employees. No, there is no such minimum qualifying size. If you are a sole trader and only have one helper, he or she might be typically designated as an employee and therefore you’ll typically need this type of insurance.

In all of the above cases, employers liability insurance might be a legal requirement. It’s worth calling us to find out more if you’re in doubt.

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