Employers liability insurance is a critical aspect of running a business in the UK, particularly if you have employees. Understanding this type of insurance is essential. Not just to comply with legal requirements but also to safeguard your business against potentially crippling costs. This blog will explain what employers liability insurance is, why it’s essential, and how it can protect your business.
What is employers liability insurance?
It is a type of business insurance that covers the financial risk associated with defending your business against claims made by employees who have suffered injury or illness as a result of their work. If an employee makes a claim, employers liability insurance can cover the legal fees, compensation payments, and other associated costs, ensuring that your business is protected.
In the UK, employers liability insurance is not just advisable—it’s a legal requirement for most businesses that employ staff. The Employers’ Liability (Compulsory Insurance) Act 1969 mandates that employers must have at least £5 million of cover. Although many insurers offer policies with higher limits. Failing to have this insurance in place can lead to significant fines, up to £2,500 for each day.
Why do you need employers liability insurance?
Regardless of the size of your business or the nature of your industry. There is always a risk that an employee could suffer an injury or illness related to their work. Even in the safest workplaces, accidents can happen, and employees may claim compensation if they believe their injury or illness resulted from their working conditions.
Without employers liability insurance, your business would have to cover these costs out of pocket. Which could be financially devastating, especially for small businesses. The insurance provides a safety net, covering everything from legal fees to compensation payouts, ensuring that your business can continue to operate even in the face of a costly claim.
What does employers liability insurance cover?
It covers a wide range of claims made by employees, including:
- Injuries caused by accidents: If an employee is injured while performing their duties. Whether it’s a slip, trip, fall, or a more severe accident.
- Work-related illnesses: Employees who develop illnesses due to their working environment. Such as respiratory conditions or repetitive strain injuries, may claim compensation.
- Legal costs: The cost of defending your business in court, whether the claim is valid or not, can be substantial. It covers legal fees, including those for solicitors, expert witnesses, and court proceedings.
- Compensation payments: If an employee’s claim is successful, the compensation payment can be significant. It covers these costs, protecting your business from potentially crippling financial losses.
Who needs employers liability insurance?
Most businesses in the UK that employ staff are legally required to have it. This includes:
- Limited companies: If you run a limited company and employ staff, you need this insurance. Even if you only employ family members or close friends, you are still required to have it.
- Partnerships and sole traders: If you hire anyone outside of your immediate family, such as employees or contractors, you need employers liability insurance. However, if you’re a sole trader with no employees, you do not need this insurance.
- Non-profits and charities: If your organisation employs staff, whether paid or voluntary, you are required to have employers liability insurance.
There are a few exceptions, such as businesses that only employ close family members or certain public organisations, but these are rare.
How does it differ from public liability insurance?
While it covers claims made by employees, public liability insurance is designed to protect your business from claims made by third parties, such as customers or members of the public. Both types of insurance are essential for businesses, as they cover different risks.
For more detailed information on public liability insurance, you can read our blog posts on what is public liability insurance and how much is public liability insurance.
What happens if you don’t have insurance?
The consequences of not having it can be severe. The Health and Safety Executive (HSE) enforces the Employers’ Liability (Compulsory Insurance) Act. As mentioned before, businesses found to be operating without the necessary cover can face fines of up to £2,500 for each day they are uninsured. Additionally, failing to display your insurance certificate or refusing to make it available to inspectors can result in a £1,000 fine.
Beyond the legal penalties, the financial risk of not having insurance is significant. If an employee makes a successful claim against your business, you could be liable for thousands, or even millions of pounds in compensation and legal fees.
Summary
Employers liability insurance is a crucial aspect of running a business in the UK. Not only is it a legal requirement for most employers, but it also provides essential protection against the financial risks associated with employee claims. Ensuring that your business is adequately covered will give you peace of mind and protect your business from potentially devastating financial consequences.
Liability insurance
Our employers’ liability insurance ensures you’re protected against claims from employees injured or made ill by their work. Get a quote today to secure your business.
