The Employers Liability (Compulsory Insurance) Act 1969 makes is a legal requirement for UK businesses to have an employers’ liability policy in place if they employ any staff. That sounds nice and simple, but of course there are always grey areas and lots of questions that people will have regarding what actually constitutes an employee. In this article we hope to shed some light on a few of the most common areas of uncertainty.
Most public bodies are not required to have employers’ liability cover and family businesses where the only staff are close family members are also exempt. Other than that, all private businesses in the UK must have a policy in place if they employ anyone.
The Need To Define What Is Meant By An ‘Employee’
You know you have to have insurance for all employees, but does this include the person who works for you a few hours a week or on a casual basis or on a contract? And what about volunteers or work experience people?
There are certain things you can use to help judge whether someone would be classed as an employee for the purposes of liability cover. The requirement for insurance is if you have a contract with someone. However, this may not be quite as straightforward as it sounds. You may be fully employing someone, taking tax and national insurance, but not have got round to issuing a written contract. The written contract is not what matters in this case, it is about the contractual arrangement. So this can be a purely verbal arrangement, or even just an implied contract. What is comes down to is the reality of the arrangement you have with the person who does work for you and a lot of it is about the extent to which you control their work.
Situations Where You May Need Insurance:
- If you exercise direct control over the work they carry out, telling them where to work and what to do.
- If you pay them through PAYE rather than an invoice, deducting income tax and national insurance contributions.
- If they are treated no differently to other permanent staff that you directly employ.
- If your company pays for their tools, work materials and uniforms.
- If the employee does not have the right to find someone else to undertake their work if they are unable to do it.
Situations Where You May Not Require Insurance:
- People working for you on a voluntary basis, or students on a work experience or training programme.
- People from whom you do not deduct income tax or national insurance.
- Freelancers or contractors who also work for other people, who do not have to work for you and who supply their own equipment or work materials.
- People who are able to arrange an alternative person to undertake their work if they are unable to do it.
Bear in mind that none of the above are absolute guarantees one way of the other and if you are in doubt you should seek legal advice. You can read more details of what the law says on the government website: www.hse.gov.uk