If you are a contractor operating your own limited company, it is imperative that you have the correct insurances in place. And with lots of different insurance policies on offer, knowing what you need is not always easy. This is particularly true when it comes to Employers Liability Insurance.
What is Employers Liability Insurance?
Employers Liability Insurance provides protection against compensation claims made by employees, resulting from illness or injury sustained during an employment.
The Employers Liability (Compulsory Insurance) Act 1969 makes Employers Liability Insurance a legal requirement for any company that has employees. And contractors are no exception to this requirement. In fact, failure to ensure adequate cover could mean prosecution and lead to heavy fines.
Exceptions to the rule
Of course, not every business will need Employers Liability Insurance. If you are the sole employee in your limited company and hold 50% or more of the shares, then your business may be exempt. Many contractors will fall into this category, meaning that there is no legal obligation to carry Employers Liability Insurance. However, the requirement changes the moment someone else is employed by your company, even where this person is your spouse or a family member.
Employers Liability Insurance may be a contractual requirement. Where this is the case, we recommend that you hold the insurance.
For a relatively small premium, contractors can usually acquire Employers Liability Insurance, usually as part of a policy with Public Liability Insurance. If you are in any doubt about what your client requires, be sure to speak to them before any purchasing decision. Failure to do this correctly could delay your assignment start or even put you in breach of contract.
Unless you are exempt from the provisions of The Employers Liability (Compulsory Insurance) Act 1969, your business must carry Employers Liability Insurance. The penalties for non-compliance are severe, up to £2,500 for each and every day that your business goes uninsured. The Health and Safety Executive (HSE) can check policy details and request sight of an insurance certificate, with further penalties applied if one can’t be supplied.
As the director, you are accountable for your limited company. Therefore, when it comes to insurance for your company, the burden of responsibility sits with you. It is of utmost importance that you assess your insurance requirements carefully, and where Employers Liability is legally required, cover is sought. So do your own research and make sure you are up to speed with what you need. Unless exemption applies, your company should hold Employers Liability Insurance for at least £5 million with an approved insurer. Failure to do so could land you in hot water, or at the very least, with a fine.
For further details about Employers Liability Insurance, please see the following guide - Employers Liability (Compulsory Insurance) Act 1969 - a brief guide for employers