Do I need employers’ liability as a limited company contractor?
New contractors – and even veteran contractors, for that matter – are often a bit baffled by employers’ liability insurance. If we had a pound for every contractor that said to us, “I don’t need that, I don’t employ anybody,” we’d have retired by now. To be fair, it doesn’t really sound like something you need when the only person you employ is, well, yourself. But don’t let that fool you. Employers’ liability cover is definitely something that limited company contractors need in their arsenal of business insurance, and we’ve put together this handy feature to explain why.
First of all, though, it would probably be most useful to talk you through what employers’ liability insurance actually is.
What is employers’ liability cover for contractors?
Employers’ liability insurance is, in its broadest sense, an insurance product for all businesses that employ staff, which is why limited company contractors often don’t understand why they need it. Even so, it’s there to protect any employees who work for you in any capacity. This includes a partner or spouse who carries out administrative work for your business, for instance. And if you have a substitution clause in your contract (a key IR35 indicator) then it would also cover any substitute you employ to carry out work for you.
We know, then who it protects, but what is it actually for? Well, say you employ your spouse part-time to carry out administrative duties and bookkeeping for your limited company. One day, they are working in your home office when their desk chair fails and collapses, causing your spouse injury. Should they choose to make a claim against the business, the employers’ liability insurance would cover this.
Or, in the case of a substitute, imagine you are an engineering contractor who takes ill and so sends a substitute in to carry out your work, as agreed with your client. While on the job, your substitute trips over equipment left out by yourself and is seriously injured. Their claim would be covered by your employers’ liability.
Is employers’ liability a legal requirement in the UK?
The short answer is yes, it can be a legal requirement. This is the case if you employ one or more people in your limited company, even if they work part-time or temporarily. So this includes family members who work for you in clerical roles, or substitutes you hire under the terms of your contract.
Do contractors need to hold employers’ liability insurance?
If you don’t have any employees at all then you’re probably wondering if you need to hold employers’ liability cover. Well, the chances are that your end-client or recruiter will put it as a clause in your contract regardless. This means you would need to hold it or else you would be in breach of contract.
Of course, the other reason to hold it is that it could be very costly not to, particularly in the case of substitutes. Imagine you are very poorly and arrange for a fellow contractor that you know to carry out the work in your place. This would be a very sudden thing and a very quick turnaround so you may not even think to put employers’ liability cover in place at that very moment. So, if they then go ahead and have an accident and make a claim, could you afford to cover the cost of legal fees and compensation all by yourself? Much better to have the insurance in place so it’s ready on the odd occasion that you do have an employee than not have it at all.
What level of employers’ liability cover do contractors need?
It’s a legal requirement that an employers’ liability policy should carry a minimum indemnity of £5 million for any one claim. However, the insurance industry standard is £10 million, which Kingsbridge is in line with. You do need to assess your circumstances to decide if this is enough. For instance, if you work in a high risk sector then you may feel you need a higher indemnity. Kingsbridge offers different levels of employers’ liability to suit your needs.
Kingsbridge offers employers’ liability as part of our package of insurance for contractors. As standard, this package includes:
- Employers’ liability cover
- Public liability cover
- Professional indemnity insurance
- Occupational personal accident cover
- Directors’ and officers’ liability insurance
Whem purchasing or getting a quote for the insurance, you can increase the levels of individual types of cover if you feel that’s best for you and your limited company. To get a quote, you can visit our website or get in touch with our friendly team of contractor insurance experts who will be able to help you adjust your insurance levels to the right amount and discuss all of your options with you.