Employers’ Liability Insurance? Does my business need it?

There are many different types of insurance that employers should consider having, but employers’ liability insurance goes one step further. That is because, in the UK, almost all employers are legally required to carry an employers’ liability policy.

Do I need Employers Liability Insurance?

All organisations that employ more than one person are required to carry at least £5 million worth of employers’ liability cover. Larger organisations may require a greater amount depending on the size of their workforce and what their operations consist of. Employers can be fined up to £2,500 for every day that they are not properly insured.

Additionally, even employers that do have adequate cover may be fined £1,000 if they do not display their employers’ liability certificate or refuse to present it to inspectors upon request.

Employers’ liability carries stiff penalties and insurance is legally required because of the importance of the security that it provides for both organisations and their workers. This type of cover may not only render necessary financial aid for employers in the event of an employers’ liability claim, but it also creates peace of mind for employees as they go about their duties. Both parties can take comfort in the knowledge that there is a contingency in place in the event of an incident occurring.

What is typically excluded on Employers Liability Insurance?

It is worth noting that there may be some exceptions to the UK’s law requiring which organisations are required to have employers’ liability cover. Some employers that are not legally required to do so might include:

  • Most public organisations
  • Some publicly funded organisations
  • Health service bodies
  • Family businesses that employ only close family members
  • Organisations operated by a single employee

These exceptions may be nuanced, so it is important for employers to review their policies or contact a broker to analyse their specific situation.

Planning Ahead to Prevent Employment Injury Claims

When acquiring an employers’ liability insurance policy, it is important for organisations to be realistic about the types of risks that their employees face and what the consequences could be. Employers must be honest with brokers in order to make sure that their policies are properly tailored to fit their needs.

Employers’ Liability Claims

Employers can be held liable for many different types of accidents or issues. In addition to the physical and emotional harm that an incident can cause for an employee and their colleagues, an employers’ liability claim can also result in devastating financial and reputational damage.

Following an accident, it is important that organisations be able to maintain normal operations while also managing the aftermath.

However, government fines, restitution resulting from a claim and the cost of legal representation can all present financial challenges. Fortunately, an employers’ liability insurance policy can provide much-needed relief.

One reason that employers’ liability cover is so important for all employers is that claims do not necessarily have to stem from catastrophic events or uncommon circumstances. Accidents resulting from seemingly simple scenarios can still lead to costly consequences.

Sawmill Company Fined After Worker Fatality

Pontrilas Sawmills Limited has been fined £200,000 and ordered to pay costs of £22,016 after an incident left an employee fatally injured. The fatality occurred on 20th December 2017, when two employees were working below a lift conveyor to remove debris. The machine had been malfunctioning and the conveyor was not descending as intended. As the employees attempted to work on the conveyor, it dropped suddenly. One employee suffered fatal crush injuries, while the other endured bruising and abrasion injuries to their head. An HSE investigation found that Pontrilas had failed to assess the risks of the employees’ tasks or provide a suitable system of work for removing the debris beneath the conveyor. The company pleaded guilty to breaching section 2(1) of the Health and Safety at Work etc Act 1974. The Hereford Crown Court imposed the aforementioned penalties on 29th January 2021.

Nestle UK Fined After Employee Gets Dragged Into Machine

On 13th January 2021, the Bradford Crown Court issued a £640,000 fine and ordered Nestle UK Limited to pay £26,234 in costs in a ruling that stemmed from an incident on 13th February 2016. During that incident, an employee was dragged into a machine after a cloth that he was holding near a gap in the machine became ensnared. The employee was unable to reach any of the emergency stop buttons from his trapped position and had to be released by paramedics after their eventual arrival. The victim suffered a double compound fracture in his arm and required surgery. An HSE investigation found that Nestle had failed to prevent access to dangerous moving parts of the machine.

Titanium Supplier Fined After Material Falls on Employee

VSMPO Tirus Limited of Redditch was fined £200,000 and ordered to pay costs of £7,293.15 after pleading guilty to breaching the Health and Safety at Work etc Act 1974. The case stemmed from an accident during which an employee sustained multiple fractures to his leg while operating a metal cutting band saw machine. The employee’s injuries occurred when nearly 1.5 tonnes of titanium fell from the machine and trapped his leg. An HSE investigation found that VSMPO had neglected to properly assess and manage the risk of material falling from the machine bed and did not implement adequate safety measures, such as extending the machine bed or installing stanchions with backstops.

What is an example of an Employers Liability Claim?

For example, a situation as normal as an employee carrying a cup of coffee back to their desk can result in a costly claim. If an uncleaned spill or a raised piece of carpet causes the employee to slip or trip, they may not only suffer injuries from the fall, but also potential burns due to their hot beverage spilling. The employer may then be held liable for not only the resulting medical costs, but also expenses related to the employee travelling to and from hospital for check-ups. A court may even order the employer to pay the employee’s legal fees.

Common types of accidents that may result in am employers liability claim

Slips, trips and falls
These accidents can take place in many different settings across a variety of sectors. If an employee trips over clutter or slips on a wet surface, it is possible that their resulting injuries could lead to an employers’ liability claim.

Electric shocks
Electricity can present a potential hazard for employees across all industries. If equipment or infrastructure are poorly maintained, employees who may be performing simple tasks can suffer serious injuries that may lead to a claim.

Manual handling injuries
Moving and lifting heavy objects can lead to both injuries and long-term health problems, such as back pain. If employers do not take appropriate precautions, such as carrying out risk assessments, minimising manual handling tasks, and providing proper equipment and training, a claim may arise.

Falls from height
Some of the most serious injuries in the workplace can result from falls from height. If workers are performing tasks at height and are injured, employers risk facing a claim if they have not implemented fall arrest systems and provided adequate training and personal protective equipment.

Industrial diseases
In the event that employees are exposed to hazardous materials while working, they may develop health issues such as occupational asthma, noise-induced hearing loss or asbestosis. These illnesses and injuries can affect employees for the rest of their lives and may lead to costly claims.

Understanding the differences between labour-only (LOSCs) and bona-fide subcontractors (BFSCs) can protect your business from costly and damaging claims.

What is the difference between a Bona-Fide and Labour-only Subcontractor?

One such challenge that you may encounter deals with what type of subcontractors you hire—specifically labour-only or bona-fide. Knowing the differences between these two classifications can help protect your business from costly and damaging risks, including fines, penalties or whopping claims.

Who are Labour-only Subcontractors?

The defining characteristics of labour-only subcontractors are as follows:

  • They work under your supervision and direction.
  • They use your materials, kit, equipment and tools.
  • They must comply with your health and safety policies.
  • They do not have a guarantee for work done.
  • They may leave part way through the job.

Essentially, labour-only subcontractors are additional employees that you hire to assist with a project.

Your firm must cover each labour-only subcontractor under your employers’ liability and public liability insurance.

Who are Bona-fide Subcontractors?

The defining characteristics of bona-fide subcontractors are as follows:

  • They work under their own supervision and direction.
  • They provide their own materials, kit, equipment and tools.
  • They are responsible for their own health and safety.
  • They may have additional employees.
  • They provide their own method statement and are responsible for their own guarantees and maintenance.

Essentially, bona-fide subcontractors are hired to complete a specific job.

As your firm would be hiring them on for a specific job, you would pay them as if it were a normal separate job, typically via invoice. In addition, because they are working independently of your firm, bona-fide subcontractors should have their own liability insurance to the same limits as you (or higher).

How do I know if a contractor is a Labour-only or Bona-fide?

If you can answer yes to all or most of the following questions, the worker is probably labour-only:

  • Are they paid hourly, weekly or monthly?
  • Can they receive overtime or bonus pay?
  • Do they work a fixed number of hours?
  • Can the principal contractor direct them how, when and where to carry out their work?
  • Can the principal contractor direct them from task to task?

If you can answer yes to all or most of the following questions, the worker is probably bona-fide:

  • Are they paid on a fixed-price contract?
  • Do they decide their own schedule?
  • Do they decide what, how, when and where to do their work?
  • Are they responsible for correcting unsatisfactory work?
  • Do they work without supervision?

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