What is employers? liability?
One of the contractor insurances we get asked about a lot is employers’ liability (often referred to as EL) because, to be honest, most contractors don’t understand why they need it when they don’t consider themselves to be employers. Despite that, it tends to be a contractual requirement and most recruitment agencies won’t even have you on their books without it, which is why it leaves a lot of contractors scratching their heads.
To help break it down, we’ve put together this blog to give you an overview of EL cover and show you why you need it as part of your insurance suite, and why it can be beneficial to you even if you don’t directly employ anybody.
What is employers’ liability? An overview
Employers’ liability insurance is, at its most basic, for all firms who employ staff. So, as a business owner, it protects anyone that you employ, either on a permanent or temporary basis, while also protecting you from the financial risk of those claims. It’s the only insurance required by law for businesses that employ staff and is even applicable in cases where a contractor employs their spouse or partner to look after clerical work (provided they’re being paid above the PAYE threshold).
It can also help you should you have a substitution clause in your contract. This is because, for it to be a true right of substitution clause, you are responsible for recruiting and paying your substitute and so you would then be classed as having an employee for as long as you’re hiring them.
Employers’ liability claim examples
But in what circumstances might you need to use your employers’ liability insurance? We have a couple of example claims for you.
Imagine you’re an IT contractor and unable to work because you’re ill. You have a substitution clause in your contract, so you arrange for a substitute to attend the client instead of you. However, before you went off sick you left all of your kit out and when your substitute arrives they trip on a laptop bag strap that you left across the floor. They injure themselves and make a claim, which is covered by your employers’ liability insurance.
Or imagine you employ your partner on a part-time basis to handle your admin. While in your office working, their chair collapses causing them to fall. As they are an employee, any claim would be covered by your policy.
As you can see, like with most insurance, you hope you never have to use it but it’s good to have it ready to go, just in case.
Why do you need employers’ liability even if you don’t employ anyone?
Even if you aren’t required to hold employers’ liability by law, many clients include EL as a standard obligation in their contracts, as do recruiters (along with public liability cover and professional indemnity). So, really, it becomes a case of needing it if you want to secure work which, of course, you do.
But there are other benefits to having your employers’ liability insurance in place. For instance, it reinforces for HMRC that any substitution clauses in your contract are, in fact, genuine and demonstrates that you are taking on financial risk. This can be a pointer towards an outside IR35 status, which is extra helpful in light of this year’s IR35 reforms.
What level of employers’ liability cover do I need?
By law, an employers’ liability policy is required to have a minimum indemnity limit of £5 million for any one claim. However, the industry standard is £10 million to ensure your claim is fully covered. Kingsbridge follows this standard with our own employers’ liability cover, which is included as part of our contractor insurance package.
The package includes:
– Employers’ liability: £10 million any one claim (unlimited in the aggregate)
– Professional indemnity: £1 million any one claim (unlimited in the aggregate)
– Public liability: £5 million any one claim (unlimited in the aggregate)
– Directors’ and officers’ liability: £100,000 any one claim (and in the aggregate)
– Occupational personal accident cover: weekly benefit of up to £500, payable for up to 52 weeks, and personal accident, death and disablement lump sum of up to £100,000
This suite of contractor insurance from Kingsbridge covers all of the basics that you need as a self-employed person, ensuring you fulfil all of your contractual and legal obligations while also protecting yourself financially and giving yourself peace of mind.
To discuss your contractor insurance requirements – whether you’re a new contractor starting or a seasoned contractor looking to renew your policy – our team of friendly experts can help you out, all you have to do is get in touch.