Legislation and the cost of avoiding litigation are frequently cited as barriers to growth for small businesses. Health and Safety, Employees Rights and Public Liability Insurance can all put a strain on the finances and ability to run a business effectively.
Employers’ Liability Insurance might be perceived as yet another burden for the long suffering entrepreneur who is, after all, helping the local community by providing jobs. So let us take a look at the potential cost of not taking out employers’ liability insurance.
1. Fines for not taking out employers’ liability insurance
You can be fined up to £2,500 per day that you are not covered. So, for instance, if you did not have employers’ liability insurance for a year, that could cost you a total of £912,500. Not many businesses would be able to withstand such high penalties and survive.
In addition, you would be fined up to £1,000 for not having a current employers’ liability insurance certificate on display for all employees to see.
2. Costs of successful compensation claims by employees
This could cover claims against your company for injuries or illnesses incurred at work. Without employers’ liability insurance in place the business owner will be personally liable for paying out such costs, including legal fees.
3. But I already have public liability insurance
Employers’ liability insurance is different from public liability insurance. You are covered by public liability insurance if a customer or member of the public is injured as a result of negligence by you or one of your employees. It does not cover health and safety incidents resulting in injury to one of your employees.
Why You Need Employers’ Liability Insurance – some examples
An office worker returning to her desk with a hot cup of coffee tripped over a raised carpet edge and landed on the floor. Her injuries included a broken arm and burns from the coffee.
The employee was off work for several weeks and had to make a number of visits to hospital. She made a claim against her employer on the grounds that the carpet was dangerous.
The employer was ordered to pay out £20,000 in compensation plus legal fees; the total payment exceeded £100,000. These costs were met by the employers’ liability insurance policy.
In another example, an employer who had not taken out employers’ liability insurance was forced out of business by a claim. An apprentice electrician forgot to earth an electrical circuit that he was attending to. He received an electric shock resulting in time off work due to burn injuries. The employer was found by a court not to have given the apprentice appropriate health and safety training. Because the business owner had not taken out employers’ liability insurance he had to meet all costs out of his own pocket. Additionally, he was fined £750,000 for not having employers’ liability insurance.
Sadly, the employer is now out of work, seeking a job in a difficult economic climate. All this could have been avoided if the employer had taken out employers’ liability insurance.
How much cover do you need?
The legal minimum of employers’ liability insurance cover is £5 million. But you really need to assess all the potential liability. Most insurers guarantee a minimum of £10 million cover.
The consequences of not having employers’ liability insurance can be very serious to the business owner.
But to finish on a lighter note, this is supposedly a genuine story of what an Australian bricklayer, who was injured at work, wrote on his accident claim form.
It was all down to “poor planning”; something the astute business owner will fail to address at his or her peril.