Employer Liability Insurance (ELI) is legally required if you have employees and requires at least £5,000. If you do not have employers liability insurance, you will be fined £2,500 for each day you are not properly insured. Furthermore, failing to present an ELI certificate or refusing to do so at the request of an inspector can result in a fine of £1,000.
Do I need Employers Liability Insurance?
Employers with multiple employees are required to have liability insurance, but there are some notable exceptions. As a general rule of thumb, the person working for you will need her ELI if:
- National insurance premiums and income tax will be deducted from the money paid
- You have the right to control when, where and how your employees work
- Most of the materials and equipment are provided by the customer.
- You have the right to your staff’s profits and you are responsible for any losses
- We are only asking that person to provide a service, and we cannot hire someone to replace them if they are unable to do so.
- They are treated like any other staff and work under the same conditions.
The key here is how much control you have over the person’s work pattern and location. You may not need employers liability insurance for someone who works for you if:
- They do not work exclusively for you, for example, as an independent self-employed contractor.
- They supply most of the materials and equipment needed to do the job
- they are in business for personal gain
- If you can’t do the work yourself, you can hire someone to replace you
- National insurance premiums and income tax are not deductible (but note that you may be classified as an employee based on other metrics)
Where can I find a provider of Employers Liability Insurance?
If you have any doubts about whether an ELI is required, we recommend that you seek legal advice. If absolutely necessary, it is very important that you use a licensed insurer, such as a company operating under the terms of the Financial Services Markets Act 2000, when applying for an ELI. By using an unlicensed insurance company, you may be breaking the law. The Financial Conduct Authority maintains a register of licensed insurance companies, which is available on its website. www.fca.org.uk/firms/financial-services-register.
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