Employers' liability insurance for small companies

Since 28th February 2005, employ liability insurance has no longer been compulsory for businesses made up of just one person - the owner.

MORE TH>N Business sees the change in the law, which will affect around 300,000 UK sole-traders, as a positive move, but warns business owners not to be complacent about varying and seasonal insurance needs.

"The amendment to the law makes a lot more sense to very small companies, as it is legally impossible for a business owner, who is the only employee, to sue themselves.
However, many businesses might not be aware that there are certain situations where taking out EL insurance is still the only option - a legal requirement in fact - and we urge owners of small businesses to consider their circumstances carefully," said Rachel Cotton, manager of MORE TH>N Business.

To help businesses determine whether they do need EL cover MORE TH>N Business' specialist underwriters have provided below a quick checklist. Answering 'yes' to any of the questions is a good indicator that it is still a legal necessity.

- Are you likely to hire staff during peak seasons to ease your workload?

It is a criminal offence not to have EL insurance when taking on temporary staff. Your business would not be covered for any liabilities if, for example, an accident happened and the temporary worker was injured in the process of carrying out work.

- Is any of your work undertaken by self-employed people?

People who you normally think of as self-employed may actually be considered as your employees in the eyes of the law, for example a handyman. Whether or not you need EL insurance for someone working for you in this capacity depends on the extent of your responsibility for their supervision, and on your terms of contract with them. If in doubt, seek legal advice.

- Do you get help from unpaid volunteers or work-experience students?

Unpaid 'helpers' may in some cases be regarded as your employees, especially where you have direct responsibility for their work and supervision. If you do have such individuals working for you, contact your insurance company to check that you have sufficient cover.

- Do you have a gardener, cleaner or security guard working for you?

Even if they work for several companies you have to take out EL insurance in respect of the work that they carry out for you. However, if you employ a firm of security guards or cleaners, for example, they should be covered by their own employer's EL cover.

- Do you employ agency staff, e.g. a delivery person or typist?

Whether or not you require EL cover for agency staff will entirely depend on the your contract with the agency. Contracts do vary, therefore make sure you check the terms and conditions, or seek legal advice.

Failure to meet EL legal requirements could result in a fine of £2,500 per day, which - over the period of a year - could amount to more than £900,000.

Finally, it is essential that businesses continually review their insurance requirements, not just when there are changes to the law - most importantly to protect their own livelihood. In all cases, if in doubt, they should seek legal advice or contact their insurance company.