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Employers’ liability insurance can cover compensation payments and legal costs if an employee sues their employer or ex-employer for a work-related illness or injury. The compensation amount may take into account things like medical costs and lost income.
Employers’ liability insurance is designed to cover the costs if an employee claims compensation for illness or injury that they believe has been caused by their work.
For example, an office worker is badly injured when they trip over a cable running across the floor. A former employee is diagnosed with an illness related to asbestos exposure during their work. A builder is electrocuted by a piece of faulty electrical equipment supplied by their employer.
In each case, a compensation claim is brought against the employer or former employer. The court can order the employer to pay compensation for injury, costs and other damages. The compensation figure may take into account things like medical care and lost income.
Employers’ liability insurance can cover the compensation payment and the legal costs, up to the limit of the policy.
If your business has at least one employee, you probably need employers’ liability insurance. A cover level of £5 million of employers’ liability insurance is the legal requirement for most businesses, although there are certain exemptions.
Most employers are required to have at least £5 million of employers’ liability cover, or face a fine of up to £2,500 per day. There are some exceptions to this rule, however: most public organisations and businesses that only employ close family members (as long as they’re not incorporated as limited companies) don’t necessarily need to have employers’ liability insurance.
This depends on whether you’re hiring ‘labour-only’ or ‘bona-fide’ subcontractors. Subcontractors who are ‘labour-only’ work under your direction and use your tools and materials. They are legally considered employees, and so they need to be covered by your employers’ liability policy. On the other hand, subcontractors who are ‘bona-fide’ work under their own direction and provide their own tools and materials, and they usually don’t need to be covered by your employers’ liability policy.
If you’re self-employed and you work on your own, there’s no need to have an employers’ liability policy (unless a contract requires you to have one). You usually only need it if you employ somebody else. There are other business insurance covers that could be useful for you, for example professional indemnity insurance or public liability insurance.
According to advice provided by the Health and Safety Executive (HSE), you may not need employers’ liability insurance if you’re hiring an independent contractor who also works for other organisations. This can be a complicated area, so it’s best to seek advice if you’re not sure.
If you run a limited company and you employ one or more people, or have more than one director, you need employers’ liability insurance. Even if you’ve only got close family members on your staff, the fact that your company is incorporated as a limited company means that you’re still required to have a policy.
Yes, you do need employers' liability insurance for part-time workers. Unless you fall under one of the exemptions, it's compulsory to have employers' liability insurance if you have any employees, even if they're part-time or temporary.
If you’ve already got employers’ liability insurance in place, it’s likely that anyone who volunteers for you will be covered by this policy, although you should double check with your insurer. If you don’t have an existing policy it’s probably a good idea to get one so that you’re covered in case one of your volunteers makes a compensation claim against you.
Yes, you need employers’ liability insurance to cover temporary staff, work experience students and anyone on a work placement.
Yes. Even if you only have one employee you’re required by law to have an employers’ liability policy with a cover limit of at least £5 million.
If you don’t have any employees you don’t need employers’ liability insurance (unless a contract explicitly requires it). However, make sure you fully understand how ‘employee’ is defined for the purposes of the legislation. If your company has more than one director or if you employ a certain type of subcontractor, you may be required to have employers’ liability insurance.
If you’re not sure if you need employers’ liability insurance, check the legislation or seek professional advice.
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