Employers Liability Insurance covers a small business for the cost of any damages claimed by employees of the company due to accidents in the workplace. Additionally, Employers Liability Insurance also covers the company for any claims which an employee makes due to an illness contracted due to negligence of the company. It should be noted that Employers Liability Insurance only covers claims made by employees of the company, not members of the public.

The question of what makes an employee an employee needs to be addressed also. Many companies use freelancers or outsource much of their workload. Often a presumption is made that no form of Employers Liability Insurance is needed in this situation. However, even an outsourced worker can be deemed to be an employee of the company if any of the following are true: a) you deduct tax and N.I. contributions on their behalf. b) You decided how, where and when they work. c) If they are unable to work they cannot provide a substitute.

Who needs Employers Liability Insurance?
Employers Liability Insurance is mandatory for most business which employs staff. It is a legal requirement and if a small business is found to have inadequate employers liability cover, the consequences are significant. There are a few exceptions to this rule. Sole traders who employ no staff do not need to arrange for Employers Liability Insurance. In a similar fashion, limited companies with a sole director who owns more than 50% of the company are not legally required to arrange for Employers Liability Insurance.

Things to look out for when procuring Employers Liability Insurance
The main question faced by small businesses that are looking to procure Employers Liability Insurance is how much cover do they need? Although the current legal requirement (which is subject to change from time to time) is £5,000,000 this may not be enough. £5,000,000 may sound like a lot of money. However, consider a worst case scenario whereby the company is responsible for the loss of life to multiple employees. In such a severe situation, £5,000,000 is not likely to be a sufficient level of cover. Indeed, most respectable insurance providers recommend a minimum of £10,000,000 cover, even for the smallest business.

Employers Liability Insurance is usually squired alongside Public Liability Insurance, and it is beneficial to purchase both policies from the same insurance provider, simply to ensure that the policies are compatible.