What is Employers Liability Insurance?

Employers’ liability insurance is compulsory for most businesses with employees, even if you only have temporary or casual employees. An employers’ 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.

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;

• A voluntary (unpaid) helper
• A trainee or person undergoing work experience
• A self-employed person working under a similar degree of control and direction as a person under contract of service
• Any person employed by someone else who is borrowed by or hired to you
• Labour only sub-contractors

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)

Your insurer or broker 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.

If you are at all unsure as to whether you are required to have Employers Liability cover then refer to the government legislation or speak to your broker.

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)

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