Employers’ liability insurance can be a very important protection for a business. For companies with employees, the benefits and advantages associated with this type of insurance are significant – and businesses that fail to buy it face severe consequences.
Although it is a legal requirement to have employers’ liability insurance if you have staff, taking out this type of insurance also shows a commitment to them that you care about their welfare.
Worryingly, many UK businesses remain uninsured. This is not a tenable position, for a variety of reasons. So why should you take out employers’ liability insurance?
To begin with, employers’ liability insurance is a legal requirement. If you are trading as a Limited Company and you employ even one member of staff, you are legally obliged to be insured. Remember that company directors are employees of the limited company. The minimum level of cover allowed in law is £5 million, but most insurers provide at least £10 million.
There is often confusion regarding the legal status of people working for a business on a more ad hoc basis, with some business owners unaware that they are employers at all. Broadly speaking, you can safely assume that a worker is an employee if they have entered into a contract of service, or if you make PAYE deductions from their wages. An individual is likely to be considered an employee if you have control over when and where they carry out their work or supply materials and/or tools of trade.
If you fail to take out employers’ liability insurance, you run the risk of being fined up to £2,500 for every day that you are uninsured. There are very few exceptions to these rules; generally, the only firms that do not require employers’ liability insurance are those that are not incorporated, or that employ only close family members (unless trading as a limited company) . However, even if this describes your business, you may still choose to take out insurance.
You will receive a certificate from your insurer when you take out a policy. A copy of this must be displayed within easy view of employees. You may choose to do this electronically, for example by making a copy available on your Intranet.
A good employers’ liability insurance policy will help to guarantee the financial security of your business in the event of an accident befalling an employee for which the employer could be held liable. This type of insurance is designed to cover the cost of a compensation claim made against you arising from such an injury that has happened in the course of their work. The policy may also pay for legal costs and miscellaneous expenses such as ambulance transport. These costs quickly add up, and a claim made against an uninsured business can be financially ruinous.
The benefits of employers’ liability insurance have become even more apparent in recent years. The rise of ‘no-win-no-fee’ lawyers has meant that a much larger proportion of the population now has access to the justice system. While this is generally a good thing, it has placed uninsured businesses at significant risk, especially as the number of cases brought against employers has increased. A single claim can easily bankrupt a business.
Employers’ liability insurance will also continue to protect you many years into the future. Many occupational illnesses take a long time to manifest and, as a result, you may find yourself facing a claim from a past employee several years down the line. You should therefore make sure to keep records of all previous policies wherever possible.
Finally, a good employers’ liability policy will provide your workers with some welcome security. Your employees should be able to do their jobs safe in the knowledge that hazards have been removed to the greatest extent possible – but also that, in the event of an accident occurring, they will have some sort of financial recourse.
As an employer you have a duty of care to your employees, and employers’ liability insurance can be seen as part of this. While good risk management and health and safety practices are of the utmost importance, it is vital that you have a suitable ‘last resort’.
Employers’ liability insurance provides you and your employees with the peace of mind that, if something does go wrong the relevant costs can be met. Your employee will be able to receive the care they may require, and you can rest assured that your business will be able to cope.
Employers’ liability insurance is a vital protection for many small businesses, aside from being a legal necessity. If you are about to take on staff, you should gather quotes from some reputable insurers as a matter of urgency.
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