A guide to the world of Employers Liability Insurance – we’ve read lots of boring legal stuff so you don’t have to.
This is important for the simple fact that if you are not suitably insured you can be fined up to £2500 for any day you are without it.
First up if you employ staff and don’t hold Employers Liability Insurance then you are breaking the law.
Unlike Public Liability Insurance (PLI) which is not compulsory (although if you own a bar not having PLI is about as sensible as going ball sack fishing for piranhas) Employers Liability Insurance (ELI) is.
It covers your staff if they are injured at work or if they, or previous employees, get ill as a result of working for you (whilst this seems unlikely in the modern world of non-smoking bars if you require your staff to straw test your drinks and they get liver damage could they sue you? Probably only in America but still….).
Second up if your insurance is not through an authorised insurer then you, may be, breaking the law. There is a list of authorised companies available at www.fsa.gov.uk
It is also important to make sure that you cannot get screwed over by your insurer if the worse-case scenario happens and you do need to make a claim. There are certain conditions which could restrict the amount of money your insurer might have to pay out. With that in mind you should make sure that your contract with them does not contain any of these conditions.
Your insurer cannot refuse to pay compensation purely because:
- You have not provided reasonable protection for your employees against injury or disease;
- You do not keep specified records or cannot provide the insurer with information from those records;
- You have done something they told you not to do (e.g. said it was your fault);
- You have not done something they told you to do (e.g. report the incident); or
- You have not met any legal requirement connected with protection of your employees.
If your insurer refuses to take some or all of these out of your contract go find another insurer.
This however doesn’t mean you can forget about your legal responsibilities to protect the health and safety of your employees. For example, you must carry out a risk assessment that is suitable and sufficient, and take all reasonable practical measures to protect your employees and report incidents. There is an example risk assessment form available here (it is for pubs but works for bars also).
You must be insured for at least £5 million however most insurers will offer coverage of at least £10 million. If you have multiple bars you can take out ELI for the group as a whole and again this must be at least £5 million.
Your ELI certificate must be displayed where all employees can easily read it. Since 2008 this can be done electronically but unless you have central hub of all things that staff have easy access to online and they are all aware of a printed version is probably best, especially seeing as the fine is up to £1000 if it isn’t displayed properly.
Who Do I Need ELI For?
You will need ELI for someone who works for you where:
- You deduct national insurance and income tax from the money you pay them;
- You have the right to control where and when they work and how they do it;
- You supply their work materials and equipment;
- You have a right to any profit your workers make although you may choose to share this with them through commission, performance pay or shares in the company;
- You require that person only to deliver the service and they cannot employ a substitute if they are unable to do the work; or
- They are treated in the same way as other employees, for example, they do the same work under the same conditions as someone else you employ.
You may not need ELI for people who work for you where:
- They do not work exclusively for you (for example, if they operate as an independent contractor);
- They supply most of the equipment and materials they need to do the job;
- They are clearly in business for their own personal benefit;
- They can employ a substitute when they are unable to do the work themselves; or
- You do not deduct income tax or national insurance. However, even if someone is self-employed for tax purposes they may be classed as an employees for the other reasons and you may still need ELI to cover them.
If you do employee anyone as volunteers, unpaid students (work experience) or a training programme it should be covered by your ELI but it is worth double checking with your insurer if you do this.
ELI is not complicated but it is not something to be ignored, whether it is an accident at work you are not covered for or the government finding out you are not up to date it could easily be the thing that brings a successful business down.
This information was taken from the Health & Safety Executive which is a UK government agency responsible for the encouragement, regulation and enforcement of workplace health, safety and welfare, and for research into occupational risks in Great Britain.