Employer’s liability insurance is compulsory for most businesses with employees, even if you only have temporary or casual employees. An employer’s liability policy will cover compensation claims and legal expenses in the event that an employee sues the business after suffering a work-related illness or injury.
The minimum legal requirement for Employers Liability cover is £5 million, however the standard cover provided by most policies is £10 million. The cover may be taken as part of a liability insurance package (along with Public Liability) or may be included within a comprehensive ‘combined’ policy covering other aspects of the business such as buildings, contents and money.
If you need a higher limit of indemnity on your liability policy (usually an amount above the standard £10m for Employers Liability or £5m for Public or Products Liability) then you may need to look at an Excess of Loss policy.
Some business owners may be unsure as to who is classed as an employee and who is not, indeed the definitions themselves can be confusing. In the most basic terms – anyone who is under a contract of service or apprenticeship will be classed as an employee however there are other definitions that, for the purpose of the legislation, are classed as an employee such as:
There are some exceptions to the requirement such as those businesses that only employ close family members (if the business is a limited company the exemption will not apply) or businesses that only use bona-fide sub-contractors.
Even if you are exempt from the legislation, it is still a good idea to obtain Employers Liability cover due to the high settlements involved in many compensation claims.
Since 2011 there has been a central database providing details of employer’s liability insurance information named ELTO (Employers Liability Tracing Office). The purpose of the database is to ensure that claims can be made quickly and to the correct insurer covering the period that the illness or injury occurred in. Some illnesses may not present themselves until many years after the employee has stopped working for the company (for example deafness claims relating to heavy machinery use)
We will now ask you for your ERN (Employers Reference Number) when you incept an Employers Liability policy. This is the number used to register your policy on the ELTO database. The ERN is the reference used when you submit payments to HMRC for your employees’ tax and national insurance payments and is also known as the employers PAYE reference. If you do not know this, your accountant or person responsible for payroll will be able to locate it for you.