Unlike the other insurances mentioned here, Employers Liability Insurance is not necessarily something every contractor will need. Most contractors work freelance and work alone, so it is unlikely they will be employing many, if any staff. Consequently they would not have any need for Employers Liability Insurance.
However, should a contractor find that their contracting work grows and grows and they need to hire other contractors or freelancers for certain jobs – then they will find themselves cast, however briefly, as an employer. In such moments they may want to consider Employer Liability Insurance.
This kind of insurance covers you for any and all claims against you by an employee or temporary worker of your business. But contractors may ask themselves if they really need it. Unfortunately the answer is yes. From the moment you employ someone you are legally bound (as part of a business operating in the UK) to get yourself Employers Liability Insurance. That’s because in the UK you are legally responsible for the safety and well-being of your employees, even if they are only your employees for a brief time.
And what does it cover you for? In a nutshell it is for any claim of injury against you as an employer by one of your employees. That could range from someone who is working for you getting injured whilst working on a machine without the correct protection, or someone falling over a plug cable and hurting their ankle, to someone who gets ill while working for you (and believes it is work related) and even someone who claims they suffered a mental illness due to work they were doing with you. There are a thousand different ways that people can claim injuries, all of which can lead to you having to pay out compensation. They might claim them at the time they are still working for you or might make a claim years later for an illness they believe traces back to the work they did for you. That is why it is not only essential to get Employer Liability Insurance but also to keep records of that insurance for many years.
So, once you accept that you need to press ahead with Employers Liability Insurance, what are the things you should look for to ensure you get a good policy? Really, the only important factor is the legal requirement – that if you have staff working for you, no matter whether it is one person or ten, you must have in place at least £5 million worth of employer liability insurance cover. However these days the standard amount that most businesses opt for is double that – £10 million. Fail to have this cover in place and you could face fines of up to £2500 per day that you don’t have it! Make sure you put it in place from the first day that you employ staff and that you keep the insurance company informed as to the precise number of staff you have on your books and whether their jobs are manual or clerical. Also, note that whilst part-time and temporary staff are included, members of your family who work for you are not.
John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.