Employers Liability

Employers Liability Insurance covers your small business if an employee is injured or falls ill at work.

All employers must take out this type of insurance, although there are a few exemptions (such as if you are the sole employee of your limited company, and also own at least 50% of the share capital in the company).

If you are a sole trader and do not employ anyone (or you only employ close family members), you should also be exempt. However, if you occasionally hire staff or use temps or seasonal workers, you must take out insurance.

The HSE provides a guide to the Employers' Liability (Compulsory Insurance) Act 1969.

Employers' Liability Insurance will meet the cost of compensation for injuries sustained by your employees (or illnesses), whether caused on or off site. It should be noted that this type of insurance only covers your employees. Potential claims made against you by other third parties (members of the public) can be covered by Public Liability Insurance.

If any of your employees are injured in a motoring accident, any claims may be covered separately by your motor insurance policy.

Generally, someone is defined as your employee if:

• you deduct N.I contributions and income tax from the salary you pay them
• you control when, where and how they work
• they cannot employ a substitute when they are unavailable to work

If you are required to take out employers' liability insurance, you must be covered for at least £5m. In practice, most insurers will offer £10m of cover. Once you have taken out cover, you must display the insurance certificate in a place where your employee's can view it.

The Health & Safety Executive have the powers to fine your business up to £2,500 per day if you are not covered properly for this type of insurance.