If you employ anyone, regardless of whether they are on a casual or permanent, full-time or part-time, volunteer or paid basis, the law requires you to have Employers’ Liability Insurance. This policy needs to cover at least £5 million. Not meeting these requirements can lead to legal action from the Health and Safety Executive and substantial daily fines. In extreme cases, it could even result in up to 14 years of imprisonment.
Employers’ Liability Insurance is mainly designed to protect your employees. If they get injured or die at work because of negligence on the part of the business, they (or their family) can claim damages or compensation for their suffering and related losses. If they win the lawsuit, the compensation might have to come from your business or personal assets unless you run a limited company. Many small businesses do not have enough assets to cover these costs.
The insurance doesn’t just cover compensation but also the associated legal expenses, which can run into thousands of pounds.
Small businesses often have close family members helping with essential tasks. The upside is that immediate family members usually aren’t considered ’employees’, meaning you might not need Employers’ Liability Insurance (though it’s still wise to have it if their work significantly impacts your business). However, if your business is a limited company, you must have this insurance even if a close relative works for you.
Failing to obtain Employers’ Liability Insurance can lead to serious consequences, even if an employee doesn’t sue for damages or their claim fails. Authorities such as the Health and Safety Executive or the Police can still file criminal charges against you.
To determine if someone qualifies as your ’employee’, consider these points:
– Do you pay them?
– Do you handle their tax and national insurance?
– Do you provide the equipment they use for work?
– Do you control how, when, and where they work?
If you answer yes to any of these questions, you likely have an employee. If you’re unsure, it’s better to consult a lawyer. This will cost much less than unexpected Employers’ Liability Insurance premiums or paying compensation and/or fines for not having it when required by law.