If you hire anyone, whether they’re working casually or permanently, full-time or part-time, volunteer or paid, you must have Employers’ Liability Insurance. This insurance needs to cover at least £5 million. Failing to comply can lead to legal actions by the Health and Safety Executive and hefty fines each day. In the worst cases, you could face up to 14 years in prison.
Employers’ Liability Insurance is mainly there to protect your employees. If they get injured or die because of something that went wrong at work, they or their family could claim compensation for their suffering and losses. If they win in court, this compensation might have to come out of your business or personal assets, especially if you’re not a limited company. Many small businesses often don’t have enough resources to cover such costs.
The insurance doesn’t just cover compensation but also the related legal costs, which can reach thousands of pounds. Often, small businesses involve family members in important tasks. The advantage here is that immediate family members usually aren’t seen as ‘employees,’ so you might not need Employers’ Liability Insurance for them, although having it can still be useful, especially if their role is significant in your business. Keep in mind, if your business is a limited company, you do need this insurance even if a close relative works with you.
Not having the required Employers’ Liability Insurance can lead to problems, even if your employee doesn’t claim damages or their claim doesn’t succeed. Authorities like the Health and Safety Executive or the police can still press criminal charges against you.
To figure out if someone is considered your ‘employee,’ ask yourself these questions:
– Are you paying them?
– Do you manage their tax and national insurance?
– Do you provide the tools and equipment they use?
– Do you dictate how, when, and where they work?
If you say ‘yes’ to any of these questions, you likely have an employee. If you’re unsure, it’s best to consult a lawyer. It might be cheaper than paying unnecessary insurance premiums or facing fines or compensation for not having coverage when it’s required by law.