Do I need employers' liability insurance as a builder?
Yes, if you employ anyone. The law requires employers' liability insurance of at least £5 million from an authorised insurer as soon as you become an employer. Going without can lead to a fine of up to £2,500 for every day.
Who needs it
Employers' liability (EL) insurance helps pay compensation if an employee is injured or becomes ill because of the work they do for you. GOV.UK says you must have it as soon as you become an employer, and HSE says that if your business has employees you will probably need it.
The exemptions are narrow. GOV.UK says you do not need it if you only employ a family member or someone based outside England, Scotland and Wales. HSE explains that the family exemption covers close relatives such as a spouse, parent, child or sibling, but does not apply to a family business that is a limited company. HSE also lists a company that employs only its owner, where that person holds 50% or more of the shares.
Who counts as an employee
The law requires cover for people you employ under a contract of service or apprenticeship. That contract can be spoken, written or implied. HSE says what you call someone, or their tax status, is largely irrelevant. What matters is the real nature of the relationship and how far you control their work.
HSE lists signs that someone may need to be covered:
- you deduct tax and National Insurance from their pay
- you control where, when and how they work
- you supply their materials and equipment
- they cannot send a substitute
- they are treated like your other employees
HSE says you may not need cover for people who do not work only for you, supply most of their own equipment and materials, can send a substitute, and are clearly in business for themselves. It adds that someone who is self-employed for tax can still count as an employee for other reasons. Apply these tests to any labour-only subcontractor working under your direction. If you are in doubt, HSE advises taking legal advice.
How much cover, and from whom
The minimum is £5 million, and HSE notes that figure includes costs. HSE says most insurers offer at least £10 million. You can hold more than one policy, as long as the total reaches £5 million. You must use an authorised insurer, and GOV.UK tells you to check the Financial Conduct Authority register. The policy covers the activities of your business, so check that it describes the work you actually do.
The certificate
Your insurer gives you a certificate when you take out or renew the policy. It must show the minimum level of cover and the companies covered. You must display it where your employees can get at it, and show it to inspectors when they ask.
Since 1 October 2008 you can display it electronically, for example on your website or intranet. HSE says employees must know how and where to find it and have reasonable access, and that this may suit employers whose staff all use a computer for work. Check that your site team can actually get to it.
There is no legal duty to keep old certificates, but HSE strongly advises keeping a full record, because some illnesses appear decades after exposure.
Fines
GOV.UK says you can be fined £2,500 for every day you are not properly insured, and £1,000 if you do not display the certificate or do not show it to inspectors when asked. HSE enforces the law and gives the same maximums, up to £2,500 a day and up to £1,000.
Public liability insurance
Public liability insurance is different. HSE says it covers claims from members of the public or other businesses, not from employees, and is generally voluntary, unlike employers' liability insurance. Clients often ask for it.