If you fit certain criteria then by law you are required to have Employers Liability Insurance and if you don’t have it in place and you are found to be in breach of the law then you can be given a heavy fine (also could be a repeated daily fine which could lead to bankruptcy) and even stopped from being the owner of a company for a period of time, the longest of which can be a lifetime ban.
You must have this insurance in place if you directly employee anyone to work for you and the easiest way to know whether or not they would be classed as employees is to look at the following questions:
1) Do you pay their tax and national insurance?
2) Do they work under your direction and with your tools?
3) If they had an accident would they hold you responsible for their injuries?
If the answer is yes to any of the above then they are your employees and you must have Employers Liability Insurance.
This insurance is used to cover if any employee was to get injured and hold you as their employer responsible for their injuries and try to claim damages from you. For example if you were a painter and decorator and you gave your employee a ladder to work on which then collapsed with them at the top and they were to fall off they would hold you responsible for their injuries and would try to claim for things such as loss of earnings from you, this is where the insurance would step in and help you out.
To get this type of insurance you generally have to add it on to a public liability insurance (which would cover yourself and employees against any third party injury or property damage you may cause) and as standard would give you cover of up to £10,000,000. Obviously as with most types of insurance like this the premiums can differ depending on things such as occupation and the amount of employees that you have working for you that need to be covered. For example a business that has five roofing employees will be more expensive than a business with one hairdresser employee.
There are certain circumstances when you do not have to get this insurance for example if you are a director of a limited company on your own (and thus classed as an employee of the limited company) then you do not need the insurance as you cannot claim against yourself. Also if it is a family business where the employees are close family members you may not need it as the same rules would usually apply.
Apart from that if you have employees then by law you must get this insurance to protect yourself in any of the above circumstances.
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