What is employers’ liability insurance?
Employers’ liability insurance is a legal requirement in the UK for most businesses that employ staff, and it can also apply to self-employed staff.
The Employers' Liability (Compulsory Insurance) Act 1969 dictates that employers must have employers’ liability insurance. The act was introduced to protect employees if they suffer injury or illness while at work.
The law is designed to ensure that injured employees can receive compensation for workplace-related injuries and that employers meet their legal obligations in this regard. Failure to comply with this law can result in penalties and legal consequences for employers.
Many business owners make a mistake in thinking that an employee is a permanent staff member on the payroll. Who is considered an employee by the Act is, in fact, much more comprehensive and can include self-employed workers.
When do I need employers’ liability insurance for self-employed workers?
Employers' liability insurance is typically not required for self-employed workers in the UK. Self-employed individuals are not considered employees but instead work for themselves.
However, there are some situations where a self-employed individual may be regarded as an employee.
Let’s look at the distinction between employees and self-employed individuals first. The former is relatively easy to identify, but self-employed workers can be engaged in several different ways by a business.
An employee is someone who has a contract with you. In the contract, their role, responsibilities and pay are clearly defined. The contract usually states the work hours, obligations, holiday allowance, and other employee benefits.
In other words, an employee works under your control and direction, and you are contractually obliged to provide them with regular work and pay them a salary.
You still need employers ' liability insurance, even if your staff are part-time or temporary.
Self-employed individuals, by definition, work for themselves. They may deliver their services as a sole trader or via a limited company. That means they invoice you a set price for the work done or charge for the hours or days they work.
You, as their client, may define the project timescales, but the self-employed worker doesn’t work under your control, and you are not obliged to provide any more work.
The contract between you relates to the deliverables of the work - be it fixing a roof, developing a website or distributing promotional leaflets. The self-employed worker will carry out the work in their own time, usually using their own recourses (office, workshop, business equipment, etc.).
In this situation, you do not need employers’ liability. Your relationship is business to business.
So when do I need employers' liability for self-employed staff?
If you enter a contract with a self-employed worker that places you in control of their day-to-day work you may be required to get employer's liability insurance.
For example, you may require them to work certain hours, certain days a week, possibly wearing your business’s uniform and representing your business similarly to an employee.
Some might argue they are still doing this work as a sole trader or a limited company. That doesn’t matter. If you treat and expect a self-employed person to act as an employee, then, as far as employers’ liability is concerned, they are an employee.
Do you need employers’ liability insurance for volunteers and apprentices?
You will likely need employers’ liability insurance in the UK if you use volunteers or apprentices. The Employers' Liability (Compulsory Insurance) Act 1969 applies to paid and non-paid workers.
If anyone comes to your place of work and works under your supervision and control, it is your obligation to protect them. Employers’ liability insurance is one of those obligations.
Do I need employers’ liability insurance for freelancers?
Employers' liability insurance is typically not required if you engage freelancers. However, it is worth assessing the freelancer’s work arrangements and how you engage them. See The Employers' Liability (Compulsory Insurance) Act 1969 for more detail.
The status of self-employed workers is surrounded by grey areas. Take the recent attempt of a Deliveroo driver trying to prove he was an employee in order to get compensation for dismissal. It was more of an employee vs contractor case, but it showed that the distinction of who is or isn’t an employee isn’t always apparent.
Therefore, if you are unsure whether a person in your business falls inside The Employers' Liability (Compulsory Insurance) Act, sometimes it is better to arrange the insurance to be safe.
If a self-employed worker in your control suffered an injury or developed an illness while working for your business, the repercussions could be very costly without the safety net of employers’ liability insurance.