The types of insurance that your business needs depends on various different factors – and extends beyond simply the amount of employees you have.
However, what we are talking about here is employers’ liability insurance, specifically: under what circumstances do you need it? Well, there are a few things you need to know.
What does it cover me for?
Employers’ liability covers the legal or compensation costs if an employee were to suffer work-related injury or illness or if they file a claim against you.
When do I need employers’ liability?
Employers’ liability is compulsory by law if you have supervision over anyone in the workplace. So, the question then becomes what counts as ‘supervision’? When you first hire a member of staff, this would certainly mean you need to be covered. However, it can be a little more complicated when it comes to freelancing. For instance, if you take on a contractor and they go away to do the job independently, then you probably don’t need employers’ liability. Whereas, if you take on a freelancer to work as part of your team either part-time, or temporarily full-time, then you will need it.
Similarly, you will be required to get employers’ liability if you take on interns, provide work experience or hire seasonal workers.
When am I exempt?
Sole traders are exempt. If you are a sole trader and choose to employ close family members then you may also be exempt – close family members don’t technically count as employees. However, it is always worth double-checking with a legal advisor or HSE on who would fall into the definition of ‘close family’.
To add to this, anyone who owns more than 50 per cent of a business isn’t technically considered an employee. Meaning, two co-owners who own 50 per cent each would be exempt. Comparatively, if the shares are split 60:40, then you would need insurance due to the fact that one of you owns less than 50 per cent and is therefore considered an employee.
It’s also important to note that, even if you are exempt legally, your clients will often require that you are insured before you provide them with any services. So always check what the insurance requirements are in the contract.
What else do I need to know?
The premium you pay for employers’ liability insurance will depend on the type of work you do. You can expect that it will be more expensive in a hazardous environment like a construction site, compared to work in an office.
If you aren’t covered when you should be then you could be fined £2,500 for every day you aren’t insured. So don’t take the risk. You must also display your certificate somewhere easily accessible – whether that’s physically on-premise or online via an employee portal. The important thing is that everyone who needs to have access to it, does. If you cannot produce your certificate for inspectors, then you risk a £1,000 fine.
Beyond employers’ liability, consider public liability, business equipment insurance and professional indemnity if you provide professional services.
Ben Rose is the co-founder and chief underwriting officer at Superscript.
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