How Does Employers’ Liability Insurance Work?

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Employers’ liability insurance acts to protect both businesses and workers financially should a worker become ill or injured due to their work.

According to the employers’ liability insurance guide by NimbleFins, businesses required to have EL insurance must have a minimum coverage amount of £5 million. Still, many insurers supply policies with £10 million of protection. This may need to be higher if a business carries out more dangerous work or has a high number of employees.

What is employers liability insurance coverage?

Employers’ liability insurance is a mandatory type of business insurance that covers legal and compensation costs if an employee should become ill, injured, or die as a result of work carried out for their employer. It covers current employees and previous employees, which protects employees if an injury or illness only presents itself years after they have left a job.

It covers many types of workers, not just permanent members of staff.

In almost all cases, it is a legal requirement for a business to hold employers’ liability insurance if it employs a member of staff. The Health and Safety Executive will fine businesses up to £2,500 a day for outstanding insurance policies. They can also fine a business £1,000 for being unable to prove it has employers’ liability insurance.

Even if a business does not legally require employers’ liability insurance (exemptions are listed below), it is wise to consider it. The latest figures show about 1.6 million people suffered a work-related illness in Great Britain in 2019/20, according to the Health and Safety Executive. According to the HSE’s Labour Force Survey, almost 700,000 working people sustain an injury at work each year. During 2019/20, 111 people died at work, the HSE’s figures showed. And £16.2 billion was the estimated cost of injuries and ill-health from working conditions.

There are exemptions when a business does not require employers’ liability insurance. These can sometimes be difficult to explain definitively, so it is always worth discussing scenarios with an insurance provider if unsure.

Is employers’ liability a legal requirement?

Yes, if your business meets certain criteria, then employers’ liability is a legal requirement. While the rules can seem confusing, in reality, if a business has staff or workers of one sort or another, then there’s a good chance the business must have EL insurance to comply with the law.

Employers’ liability insurance is required in almost all circumstances, even if the people a business takes on are not permanent or full-time. A business probably needs to take out employers’ liability insurance if it does any of the following:

  • Supplies all equipment and materials to do the job.
  • Controls when and where someone works and how work is carried out.
  • Deducts national insurance and income tax from money paid for the worker.
  • Has a right to profit made (even if the business does not keep it all).
  • Treats the worker in the same way as other employees – by giving them the same working conditions for the same work.
  • Demands the work is carried out by the sole person, rather than allowing work to be subcontracted out to someone of the worker’s choosing.

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