What is Employers’ Liability?
Employers’ liability is the legal definition of a business being held responsible for a member of staff’s illness, injury or death. Insurance to protect against compensation and legal fees is required by law under the Employers’ Liability (Compulsory Insurance) Regulations 1998.
According to insurance experts NimbleFins, employers’ liability is part of safeguarding measures in the UK which means a business will always have access to adequate funds to compensate an employee or their family should they come to harm while at work.
If a member of staff is seriously injured, it could cost a business millions in compensation claims to pay for their medical bills and their inability to work. It is, therefore, a legal requirement for businesses to take out at least £5 million of cover in their policy.
Some people are not classed as employees and therefore don’t need to be covered under the legislation. But the law does cover more than just permanent, full-time members of staff.
What does employers’ liability coverage cover?
Employers’ liability coverage covers compensation claims and associated legal costs if a member of staff is injured, becomes ill or dies, and the business is held responsible. For example, compensation claims would be made for medical bills, loss of earnings and future inability to work. The claimant could also sue for damages to cover other issues such as modifications to their house to accommodate a disability.
For example, a mechanic could break their foot if a car part fell on it due to inadequate equipment available and sue the garage. Or a carpenter at a kitchen cabinet supplier could cut their arm off while using a cutter supplied by the workplace and sues their employers for medical bills, being unable to works, plus the value placed on going through the trauma. Or a builder could find later in life they had been exposed to asbestos and have lung issues, so claims compensation for medical expenses and damages for their life expectancy is shortened. These incidents could run into hundreds of thousands of pounds, if not millions.
Who needs employers liability insurance UK?
Most businesses in the UK hiring someone to work need to take out employers’ liability insurance. However, there are several exemptions for more flexible workers.
Workers that do legally need to be covered by employers’ liability insurance are those who:
- Have all equipment and materials to do the job supplied by the employer.
- Have their hours and location of work controlled by the employer.
- Has national insurance and tax deducted by the employer?
- They are treated the same as other employees, with the same working conditions and work.
- Must carry out the work themselves and cannot subcontract out.
- Must share or give all profit to the employer.
Workers that do not legally need to be covered by employers’ liability insurance are those who:
- Supply their own equipment and materials for the job.
- Do not work exclusively for the business.
- Do not have national insurance or income tax deducted by the employer. (Although workers classed as self-employed for tax reasons but are still classed as an employee need employers’ liability insurance.)
- Are a close family member, and the employer is a sole trader (limited companies still need employers’ liability insurance for family members).
- Are based abroad and doesn’t spend more than 14 days in a row in Great Britain (Or seven continuous days on an offshore location)
- Operate as a business.
- Can subcontract the workout and do not have hours and location set by the employer.
- Can keep all profits made.
Even though some are workers exempt from employers’ liability insurance, some businesses still cover these people with insurance because they work in risky jobs or do not want to absorb the risk themselves.
The Health and Safety Executive says 1.6 million people suffered a work-related illness in Great Britain in 2019/20 in its Labour Force Survey. It estimates 13,000 deaths each year linked to past exposure at work, such as chemicals or dust.
Work-related injury and ill-health in 2018/19 cost £16.2 billion, it estimates, with £10.6 billion due to new cases of ill-health and £5.6 billion relating to workplace injury.
Is employers’ liability the same as a public liability?
Employers’ liability is not the same as public liability. For example, employers’ liability relates to staff members, but public liability relates to third parties – members of the public or suppliers and potential customers.
Public liability insurance covers compensation claims for illness and injury and damage to property where the business is accused of being at fault.
Public liability insurance is, therefore, especially important if high volumes of people visit or are near the workplace. A shop, for example, has heavy footfall from members of the public who could slip, have property damaged, or fall victim to other risks in the shop. Equally, those who work in public spaces or people’s homes are at a high risk of compensation claims. For example, imagine if a sports trainer working in a park ran into someone or damaged property, or a plumber caused a leak through a customer’s ceiling. These victims could both sue for compensation. Public liability insurance pays for the damages and associated legal costs of a claim, as well as defending against bogus lawsuits.
While employers’ liability insurance is a legal requirement, public liability insurance is not. But it is still one of the most popular business insurance products, largely down to the tens of thousands of claims made every year. There were more than 72,000 public liability claims made in the UK in 2019/20, according to the Government’s Compensation Recovery Unit, and £6.641 million paid out in compensation, according to the figures.
Businesses wise to look into public liability insurance include:
- Pubs, bars and nightclubs
- Restaurants and cafes
- Hairdressers and beauty salons
- Event organisers
- Window cleaners
- Tree surgeons