Employers’ liability insurance (ELI) is a must for many businesses, but are you one of them?
We look at everything you need to know about employers’ liability insurance.
Small Business Pro has a 24/7 legal and tax line that you can call if you need dedicated expert support. It will also help with the heavy lifting of managing customers, taking payments, insurance, finance and HR, plus you’ll get a host of personal wellbeing benefits.
You can find out more about Small Business Pro here.
Employers’ liability insurance covers you if your employees or ex-employees develop a work-related illness or get injured on the job and they make a claim against you.
It covers legal costs, medical costs, lost income and possible court-ordered compensation.
This includes staff working from home – though they’re working from a different location, it’s still your responsibility to make sure they’re protected from injury. If possible, you should carry out a risk assessment of your employees’ home spaces to check if they’re suitable. This could include checks of the workstation itself, lighting, flooring, data security and electrical installations. If you can’t check the spaces, you should provide information on how to work from home safely. Contact your insurance provider if you’re unsure who or what is covered as well as what actions you’ll need to stay in line with the Ts and Cs.
The Health and Safety (Display Screen Equipment) Regulations 1992 applies to users who habitually use screens for work. Make sure your employees have regular breaks and eyesight tests, and provide adjustable furniture as well as health and safety information.
However, employees also have a ‘reasonable duty of care’ over their own health and safety at work. They should keep you as the employer in the know as to any changing health and safety risks along with any changes that are needed for their working wellbeing.
What happens if you don’t have ELI? “The most common mistake would not be getting the cover when it is legally required. This would usually result in prosecution if a claim was made against them,” said Jordan Gregg, group underwriting director at Cedar Underwriting.
Worrying figures show that 44 per cent of SMEs are skimping on insurance in order to save money during the cost-of-living crisis, say money.co.uk. A substantial 40 per cent are underinsured, meaning that they don’t have enough insurance to cover the needs of their business.
Further research shows that over 160,000 small businesses in the UK, with between one and nine employees, will not have employers’ liability insurance by the end of 2023, according to research from Smart Money People.
This could lead to serious consequences in future. “Even if a claim wasn’t made, the client may find it difficult to get insurance coverage again as they would be required to disclose this fact to future insurers,” said Gregg. “Insurance companies would see this as a red flag of poor risk management and lack of understanding of the client’s obligations. All businesses are considered ‘sophisticated buyers’ and therefore should be aware of their obligations.”
Businesses breaking law over employers liability insurance – Nearly a million small businesses are unwittingly breaking the law by not having compulsory employers’ liability insurance cover in place – and penalties are severe
You might even secure it as part of an insurance deal, without even realising. “Some small ‘package’ type policies would just include EL as standard,” said Gregg. “A package policy is where a series of covers are ‘packaged’ together rather than picking and choosing what is required.”
Oh, and ELI is required by law if you have more than one director.
Buy insurance as you would buy many other financial products – through insurers or through intermediary services such as brokers or trade associations. It may also come as part of an insurance package as Gregg mentioned. Whichever way you get it, do shop around and compare quotes.
“[Comparison sites] all have different filters so that you can get the right product for you. Depending on the size of your business, how many employees you have – all sorts depending on what you’re looking for and then you can [go] bespoke that with the providers directly once you get your quote,” said Jamie Day, associate at Slater & Gordon. “It’s quite good at being able to disseminate what your business needs.”
Check the register on the FCA website just to be sure that your insurer is legitimate. By using an unauthorised insurer, you could be breaking the law. The Financial Conduct Authority keeps a register of authorised insurers, which is available on its website www.fca.org.uk/firms/financial-services-register.
According to NimbleFins, ELI costs in the region of £61-£600 a year per employee, depending on how risky the work they undertake is. Its own figures show that two lower risk workers costs £232, two moderate risk workers costs £289 and two higher-risk workers costs £541.
“Retail workers for example would attract a lower premium as the exposure to death, injury or illness is minimal, much like clerical workers. Those working in manufacturing processes with heavy machinery are at a higher risk of injury,” said Gregg. “The most expensive premiums tend to be those that work at height and/or where heat is involved. For example, roofers and scaffolders attract expensive premiums due to the dangerous work and potential injury should something go wrong.”
Location can also play a role here. Areas where more ELI claims are made are likely to attract higher premiums. Let’s not forget the size of your company too.
Start speaking to your broker early and have all of the relevant risk-based documentation to hand. Having good training protocols in place to reduce the risk of further accidents is key, as is an accident log with previous incidents for full transparency. The Health and Safety Executive’s (HSE) full risk assessment service can help you along here.
Day uses the example of a food business that accidentally causes a customer to go into anaphylactic shock with a dish it serves. “If your staff are involved in that process, they can be liable, which comes back on you as the employer.”
As mentioned, inadequate training can come back to bite you. “If employees hurt themselves and their health and safety training hasn’t been done, whether that be manual handling or basic health and safety and risk assessments of the premises in general. It’s quite wide reaching, really.”
Employment practices liability insurance can protect you against litigation when an employee claims for some form of violation – this includes workplace harassment, discrimination and wrongful termination. It potentially covers the claimant’s costs and legal representation for employment investigations. The cost of back-paying wages will be from the dismissal date to judgment date if you’re ordered to reinstate the employee.
You might have come across workers compensation insurance, but it’s a type of insurance that’s available to workers in the USA. Say that an employee gets ill or injured and has to take time off work or are unable to return to work. If it happened during working hours, they may be due some compensation. They could claim for lost earnings and other expenses that the illness brought about, along with medical fees and legal costs.
If you are looking for a cost-effective, all-in-one business platform with added protection, why not try Small Business Pro? With just one subscription, you’ll get tailored insurance policies to protect your business and your employees, as well as £10,000 personal Term Life cover.
What insurance do you need for a small business? – A look at what cover is out there and the policies you may require.
Employers’ liability insurance – don’t get caught out! Whatever the line of work, all small businesses will carry an element of risk which could affect its staff
What insurance do I need for my beautician business? We help you to scope out what insurance you need as a beautician as well as the need-to-know extras and restrictions
Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business. More by Anna Jordan
Small Business is the UK’s number one site for small business owners. Our expert team produce daily news and advice pieces on the most pressing issues facing small companies today, covering topics from how to finance your business to finding the right software and technology.
SmallBusiness.co.uk provides advice and useful guides to UK sole traders and small businesses. Our goal is to help owner managers and entrepreneurs to start, run, grow and succeed in business, helping turn your business idea into a profitable business.
