Employers' liability insurance

Employers’ liability insurance Act 1969

Employers are responsible for the health and safety of their employees while they are at work.

Most employers are required by the law to insure against liability for injury or disease to their employees arising out of their employment. Your employees may be injured at work or they, or your former employees, may become ill as a result of their work while in your employment. They might try to claim compensation from you if they believe you are responsible.  The Employers’ Liability (Compulsory Insurance) Act 1969 ensures that you have at least a minimum level of insurance cover against any such claims.

1.    Definition, exemptions

Employers’ liability insurance is compulsory insurance.

Employers’ liability insurance will enable you to meet the cost of compensation for your employees’ injuries or illness whether they are caused on or off site. However, any injuries and illness relating to motor accidents that occur while your employees are working for you may be covered separately by your motor insurance.

You must have Employers’ liability insurance if any of your employees based in England, Scotland or Wales (including offshore installations or associated structures).

Under the law in Great Britain you do not need employers’ liability insurance to cover any of your employees who are based abroad (eg if they are on secondment).However, you should check whether the law in the country where they are based requires you to take out insurance or take any other measures to protect your employees.

If any of your employees are normally based abroad but spend more than 14 days continuously in Great Britain, or more than seven days on an offshore installation, under the law in Great Britain you will need employers’ liability insurance for them.

You need employers’ liability insurance unless you are exempt from the Employers ‘Liability (Compulsory Insurance) Act. The following employers are exempt*:

• most public organisations including government departments and agencies, local authorities, police authorities and nationalised industries;
• health service bodies, including National Health Service trusts, health authorities, primary care trusts and Scottish health boards; some other organisations which are financed through public funds, such as passenger transport executives and magistrates’ courts committees;
• family businesses, ie if all of your employees are closely related to you (as husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister). However, this exemption does not apply to family businesses which are incorporated as limited companies;
• companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company.

*Further exemptions from the need to have employers’ liability insurance are listed at section 3(1)(a) and section 3(1)(b) of the Employers’ Liability (Compulsory Insurance) Act 1969, and Schedule 2 to the 1998 Regulations. 

2. Authorised insurer, insurance cover, certificate of insurance.

You must use an authorised insurer. If you do not, you may be breaking the law.

You must be insured for at least £5 million. However, you should look carefully at your risks and liabilities and consider whether you need insurance cover of more than £5 million. In practice, most insurers offer cover of at least £10 million.

There are certain conditions which could restrict the amount of money your insurer might have to pay, which you cannot agree and your insurer cannot impose. You should make sure that your contract with your insurer does not contain any of those conditions.

When you take out or renew a policy, your insurer will give you a certificate of employers’ liability insurance. This must state clearly the minimum level of cover provided and the companies covered by the policy. You must display a copy of the certificate of insurance where your employees can easily read it.

3.  Who do you need to cover with Employers’ liability insurance?

Whether or not you need employers’ liability insurance for someone who works for you depends on the terms of your contract with them. This contract can be spoken, written or implied. It does not matter whether you usually call someone an employee or self-employed or what their tax status is. Whether you choose to call your contract a contract of employment or a contract for services is largely irrelevant. What matters is the real nature of your relationship with the people who work for you and the nature and degree of control that you have over the work they do.

You may not need employers’ liability insurance for people who work for you where:

• they do not work exclusively for you (for example, if they operate as an independent contractor);
• they supply most of the equipment and materials they need to do the job;
• they are clearly in business for their own personal benefit;
• they can employ a substitute when they are unable to do the work themselves;
• you do not deduct income tax or national insurance. However, even if someone is self-employed for tax purposes they may be classed as an employee for other reasons and you may still need employers’ liability insurance to cover them

In some cases you will not need additional employers’ liability insurance for volunteers or for:

• students who work for you unpaid;
• people who are not employed, but taking part in a youth or adult training programme; or
• a school student on a work experience programme.

4. What happens if you do not have employers’ liability insurance?

The Health and Safety Executive (HSE) enforces the law on employers’ liability insurance and HSE inspectors can check that you have employers’ liability insurance with an approved insurer for at least £5 million. They may ask to see your certificate of insurance and other insurance details.

You can be fined up to £2500 for any day which you are without suitable insurance. If you do not display the certificate of insurance or refuse to make it available to HSE inspectors when they ask, you can be fined up to £1000.

5. Where you can get further information?

Any matters on Employers’ liability insurance  regulated by  Employers’ Liability (Compulsory Insurance) Act 1969 (ISBN 978 0 10 545769 5), the Employers’ Liability (Compulsory Insurance) Regulations 1998 (SI 1998/2573 ISBN 978 0 11 079725 0) the Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 2004 (SI 2004/2882 ISBN 978 0 11 050068 3), and the Employers’ Liability (Compulsory Insurance) (Amendment) Regulations 2008 (SI 2008/1765 ISBN 978 0 11 081970 9) from your local branch of The Stationery Office or from any good bookshop.