In the United Kingdom it is a legal requirement by way of the Employers Liability (Compulsory Insurance) Act 1969 for all individuals,, businesses and companies that employ people to hold a current Employers Liability Insurance policy with a minimum limit of indemnity of £5,000,000. There are a few exceptions to this which we will explore later.
Employers liability policies protect the policyholder in respect of claims made against them be employees in respect of their legal liability for personal injury or illness sustained by the employee in the course of their employment.
How much employers liability insurance do I need?
The statutory minimum requirement is for a policy with a limit of £5M although in practice the majority of policies available in the market are issued with a £10M limit. A policyholder can elect to increase this limit if they feel that the business is potentially exposed to claims larger than this amount and this can often be brought about by greater numbers of employees in a single location or unusually hazardous activities being undertaken by the employees.
Buying Employers Liability Insurance
In all but a very few cases, Employers Liability, or EL insurance as it is often referred to, is not available as a stand alone insurance product. It is much more commonly available alongside public liability insurance or as part of a package of business insurance products such as office insurance, shop insurance, business combined insurance. For the majority of businesses in the U.K. cover is available easily on-line or by a simple phone call to a broker. More complex risks and requirements will often be better handled by a broker, such as Blackfriars, that specialises in the arrangement of liability insurance.
When is Employers Liability not a legal requirement?
While the Act requires most employers to hold a valid insurance policy, there are some exceptions to the Act and whilst there is no legal requirement for the cover it does not mean than these entities should not purchase the insurance.
- Certain government departments and agencies
- Small family run businesses where all employees have close family links with the principal of the business e.g.son/daughter, father/mother and siblings. This exclusion does not apply if the business is a limited company.
- Limited companies where the only employee holds at least 51% of the shares in the company
What is the cover under an Employers Liability Policy?
In addition to the core protection of the policyholders legal liability for injury to employees and and awards made in respect of this, the policy also includes cover in respect of the legal defence of any claim made against the employer. This can be a vital component of the protection as even the most frivolous or groundless case against and employer can cost many thousand of pounds to resolve and be potentially very damaging to the business.
The policy will generally also include cover in respect of defence costs in respect of criminal proceedings brought against the policyholder or employees under the Health and Safety at Work Act 1974.
The cost of Employers Liability Insurance
As with all insurance polices the annual premium for cover varies from insurer to insurer, but the basic price is determined by a few important factors that help the insurer to better understand the risk they are being faced with, in short these are
- How many employees do you have and what do they do?
- Have you had any previous claims or losses and how long have you been in business?
- Where do your employees undertake the work they do?
Whilst there are other considerations such as the insurance companies experience in a particular trade or industry it is these key factors that determine the premium you pay.
In truth the cost of employers liability insurance against the potential losses represents extremely good value for businesses and cover for a wide range of businesses is available at very low costs indeed.