When contractors, new and old, go through their business insurance requirements, one that always has them scratching their heads is Employers’ Liability cover. “But I don’t employ anyone,” is usually one of the first things they say and we do get it. After all ‘contractor’ and ‘employer’ aren’t exactly synonyms but that shouldn’t lull contractors into a false sense of security - employers’ liability is an insurance product that many contractors do need in their repertoire of insurance policies.
Before we can really go into the whys and wherefores, it would probably be helpful to explain exactly what employers’ liability cover is.
What is employers’ liability insurance?
In the broadest sense, employers’ liability cover is insurance held by all businesses that employ at least one member of staff. This is exactly why limited company contractors don’t often understand why they need it – after all, they are the director of their limited company, not an employee. However, the cover is there to protect employees who work for you in any sort of capacity. This could include:
Your partner or spouse who works part time to do bookkeeping and administration for your business;
The contractor you hire on occasion as a substitute to carry out work on your behalf, activating the right to substitution clause in your contract
This is who it protects, but when is it actually needed? Imagine your spouse works for you on a part-time basis carrying out admin and bookkeeping. One day, they are working in your office and a filing cabinet that wasn’t properly anchored to the wall falls and injures their foot. They could choose to make a claim against the business and if a decision is made that the employer (you) is liable, this would be covered by your employers’ liability insurance.
Or let’s say you’re an IT contractor who falls ill and so hires a trusted substitute to carry out work for the client so that the project doesn’t fall behind on timescales. Unfortunately, while working, your substitute trips over cables you did not properly secure and is injured. They decide to sue your business for their injury and again, this claim would be covered by your employers’ liability.
Is employers’ liability legally required in the UK?
The short, simple answer is yes. Employers’ liability is a legal requirement in the UK. This is the case if you employ one or more people, whether full-time, part-time or on temporary contracts. As already mentioned, this includes substitutes you may hire (assuming the terms of your contract require this) or family members carrying out clerical positions.
Do all contractors need to hold employers’ liability cover?
If you don’t have any employees then you may be wondering if you need to purchase employers’ liability at all. First and foremost, your recruiter or end client (depending on who your contract is with) may require it in a clause in your contract. This means that not holding it would put you in breach of contract.
Secondly, it can be very costly not to hold it. After all, it’s worth remembering that although you may not employ anyone right now, you may have to activate your right to substitution clause at a moment’s notice. For instance, you could fall ill or have an unexpected family emergency that instigates you to hire a substitute and so may suddenly find yourself with an employee when you didn’t previously have one. Not only would you then be breaking the law by not holding employers’ liability, if they go ahead and have an accident and subsequently make a claim against your business, could your business afford to pay legal fees and compensation out of its reserves? It’s much better, surely, to have the cover set up and in place for the odd occasion you find yourself needing it, rather than not having it at all.
What level of employers’ liability do contractors need to hold?
Legally, an employers’ liability policy should cover a minimum of £5 million for any one claim. However, you need to examine your own circumstances to decide if that is enough or if you should opt for more cover. For instance, your contract may stipulate a higher minimum which you would need to adhere to or you may work in a high risk industry or sector and decide that you would feel more comfortable with a higher indemnity limit.
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Kingsbridge’s employers’ liability cover is included as part of their business insurance package - which also includes professional indemnity, public liability, personal accident cover and directors’ and officers’ liability - covering all of the main contractor insurance policies in a one-stop-shop. To make sure your limited company is covered, you can get in touch with Kingsbridge by speaking to your Orange Genie Account Manager or get in touch with Kingsbridge on the details below:
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