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Employers’ liability insurance: What, why and how

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SME’s taking on more staff is positive news both for the company itself and the health of the UK economy. By that standard 2014 was a stellar year.

According to recent figures from insurance group LV = Broker, 180,000 people started running their own business in 2014 – with a fifth of SME’s taking on more staff and 4 per cent employing people for the first time.

However LV also found that one in twenty of the country’s SME’s had no insurance cover in place – that’s equivalent to around 200,000 companies nationwide.

Of greatest concern was the revelation that 80,000 SME’s who employ staff had no employers’ liability insurance in place leaving themselves vulnerable to prosecution and fines running into the thousands of pounds.

So although SME job creation should be cheered to the rafters it is strikingly worrying that some of those same businesses are putting their future at risk simply because they either don’t understand or can’t be bothered to take out the required insurance cover for their new staff.

So what is employers’ liability insurance, what will it cover you for and why is it so vital for you to take it out?

Employers’ liability insurance cover is compulsory. It covers employers for the cost of compensating your employees from injury or by becoming ill through their work.

That includes a staff member tripping over a carpet in your office and breaking their wrist or getting injured whilst working for you outside your office and workplace.

Some employers don’t need to get the cover – such as those with no employees and family businesses who employ only family members such as granny for cleaning or uncle Dave doing your books.

However family businesses incorporated as limited companies do need to get cover. An employee is defined as someone employed under a contract of service with you and can include apprentices, students on a work experience scheme and labour only subcontractors.

So in short your policy should cover claims from permanent employees, contract, casual and seasonal employees. If you have any doubt as to what constitutes an employee then you should seek legal advice.

Read more about business insurance:

You can obtain cover directly from an insurance provider of via a specialist broker. You can find one via the British Insurance Brokers Association.

You are obliged to have cover for compensation of at least £5m but many firms look to get cover for up to £10m. Chat with your provider or broker to see what will be best for you.

In terms of premium costs it will depend on the type of work your business does, how many staff members you have and as with other types of insurance your previous claims history.

It is understood that one of the reasons that thousands of SME’s don’t take out Employers’ Liability insurance cover apart from the feeling that “it will never happen to me” is the amount of paperwork they believe they will have to complete.

The Health and Safety Executive reassures SME’s however that insurers do not need businesses to show any “formal evidence that you are keeping to health and safety regulations nor do they ask to see health and safety documents as a condition of granting insurance cover”.

If an owner also employs fewer than five employees there is no legal or insurance requirement to complete written risk assessments either.

However the HSE stresses that good record keeping such as H&S training records and written risk assessments could be useful when defending a civil law claim.

Your Employer’s Liability insurance certificate will state the minimum level of cover provided and must be displayed where your employees can easily read it. This includes online.

If you don’t have this cover it will cost you. You could be fined up to £2,500 a day by the HSE until you do get protection and a £1,000 fine if you refuse to show your certificate to an HSE inspector.

Employers should also consider taking out Public Liability Insurance which covers businesses for injuries, disease or damage to people that you do not employ at your place of work.

This could include a member of the public falling down the stairs at your shop or clients tripping over whilst visiting your office for a meeting.

It is not compulsory but it is certainly a good idea to get cover as a claim could cost you thousands of pounds and leave your business in financial disarray.

LV said two-thirds of consumers it surveyed said they would make a claim against a small business if they slipped over or were injured whilst on their premises.

Some risks to the future of your business are hard to prevent – such as a faltering economy or changing consumer tastes but a damagingly huge insurance claim doesn’t have to be one of them.

Get in a touch with an insurer and get covered.

Image: Shutterstock

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