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Employers Liability Insurance – make sure you have it!

13 October 2017, Companies, Employer, Charities, Creative Industries, Sole Traders

Following an anonymous complaint to the Health and Safety Executive (HSE), a small Manchester-based company received a fine of £2,500 for failing to have adequate Employers Liability Insurance (ELI).  What are the rules?
 Employers Liability Insurance is required if you have employees

Anonymous tip-off

In September 2017 the HSE announced that it had successfully taken enforcement action against T&W Linen Co Ltd (T).  In April 2017 the HSE received an anonymous complaint.  From there, it decided to conduct a full inspection of T’s premises.  During that inspection, the HSE discovered that T did not have any Employers Liability Insurance (ELI).

No Employers Liability Insurance

Under the Employers Liability (Compulsory) Insurance Act 1969 (the Act), Employer Liability Insurance is a mandatory requirement for all employers except for certain limited exemptions.  The HSE prosecuted T for breaching the Act.  T subsequently pleaded guilty.  Manchester and Salford Magistrates’ Court fined T £2,500 with costs of £429.  Following this conviction, the HSE is reminding business owners about their legal obligations.  The HSE is also warning that it will take enforcement action where there are breaches of the Act.

A general reminder

So what do you need to know?  Firstly, all private businesses must have ELI except for certain family businesses.  An employer does not need to have ELI if all employees are close family members.  This exemption does not apply to family businesses that are limited companies. They must have Employers Liability Insurance.

Sole Director Companies

Companies that only employ their owner, i.e. sole directors, do not require Employers Liability Insurance if that individual also owns 50% or more of the issued share capital in the company.

Minimum cover

Any business that requires Employers Liability Insurance must have cover of at least £5 million.  In practice, though, most insurers offer cover of at least £10 million.  A copy of the ELI certificate must be displayed where employees can easily read it.

Display your certificate

Since 1 October 2008 employers have been allowed to display their ELI certificate electronically, e.g. on a staff Intranet.  Employers choosing this method need to ensure their employees know how and where to find the certificate and have reasonable access to it.

Keep copies of old certificates

There is no legal requirement to keep out-of-date ELI certificates.  This has not been the case since October 2008.  Nevertheless, the HSE advises employers to keep, as far as is possible, a complete record of their ELI cover as some diseases can appear decades after exposure to their cause.  If you don’t, it is possible that your business may have to meet the costs of a claim itself.

Personal liability for directors

The Supreme Court has previously confirmed that a director can’t be held personally liable for compensation where the company’s ELI is found to be inadequate.  However, they can be guilty of a criminal offence if ELI wasn’t ever arranged in the first place.

All companies must have Employers Liability Insurance with at least £5 million of cover and display the certificate where staff can see it.  The only exception is where a company has a sole director who owns at least 50% of the shares.  Directors can be personally guilty of a criminal offence if adequate ELI isn’t arranged.
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