Whether you have a small business employing one assistant or a chain of offices across the UK, you’ll likely need employers’ liability insurance to conduct business. But how do you budget for this type of insurance? What’s the average employers’ liability insurance cost? And how do you get employer liability?
When they give you a quote, insurers consider several different factors, so there’s no way to know exactly what you’ll have to pay for your employers’ liability policy until you shop around. But it’s possible to estimate it, based on certain criteria.
Here, we’ll explain why businesses need to pay for employers’ liability insurance. We’ll also break down the criteria insurers look at, and give you an idea of the costs you can expect and the coverage you’ll likely get for your money.
What is employers’ liability insurance?
In the UK, businesses pay for an employers’ liability policy so that they’re protected if an employee sues their company. An employee might take legal action against your company if:
- They’re injured through an accident at work, such as a slip, trip, or through equipment they use on the job
- They’re incapacitated by a work-related injury, like back pain as a result of heavy lifting, or a repetitive strain injury (RSI)
- They become unwell as a result of their work, for example, if their job involves handling chemicals that require specialised training and equipment
If a workplace injury happens despite your best health and safety procedures, your employers’ liability insurance is designed to cover the legal fees, as well as the cost of settling a claim, which can include:
- Your employee’s medical bills
- Wages they lost while they were unable to work
- Financial compensation for the distress caused
Read more about what’s included in employers’ liability insurance.
Why is employers’ liability insurance so important?
There are several compelling reasons to make sure your business has the right level of employers’ liability coverage.
Employers’ liability insurance is often a legal requirement
With a few exceptions (which we’ll discuss in a moment), businesses in the UK are legally obliged to have employers’ liability insurance.
You need to have it in place if you have one or more employees, if people volunteer for your business, or if you work with subcontractors. It also applies if your staff work from home.
Wondering what the minimum employers’ liability insurance is in the UK?
Companies are required to have a minimum of £5 million employers’ liability cover. In practice, however, most policies will offer at least £10 million cover.
Accidents happen
Even in the most safety-conscious workplaces, the unexpected can happen. This type of insurance doesn’t just cover accidents in more inherently dangerous workplaces (for example, factories, warehouses, and farms), but also problems like RSIs.
RSIs commonly affect people who work on checkouts, who type or enter data, decorators, and anyone who works with vibrating tools.
Employers’ liability claims can be expensive
Even for larger businesses, the cost of settling an insurance claim from an employee can be potentially disastrous. Compensation costs for personal injury at work can be huge, and even if the case goes in your favour, you’ll have to pay legal fees.
It’s also important to know the cost of not having employers’ liability insurance. If you don’t have an appropriate policy for your business, you risk a fine of £2,500 for every day you’re uninsured. And if you can’t show the appropriate certificates when your business is inspected, you also risk a £1,000 on-the-spot fine.
How much is the average employers’ liability insurance?
Although employers’ liability is legally mandated, the cost of the insurance isn’t set in stone. Some businesses may have to budget around £60 per employee per year, others may need £200 per employee per year — or even more.
Insurers decide the cost of employers’ liability insurance by balancing the risk your business represents. Essentially, they consider how likely it is that they’ll have to pay out if they insure your company. Likewise, business owners have to balance the cost of the policy with the level of coverage it provides.
Deciding factors for employers’ liability insurance cost
Generally, insurers consider the following information when quoting for employers’ liability insurance.
Number of employees
The more employees you have, the more statistically likely it is that your insurance will have to make a payout. Businesses that employ more people will also have a higher insurance bill because premiums are usually calculated per employee per year.
That said, some insurers may charge slightly less per employee if you take out insurance for a large number of people. So while a small local coffee shop with 10 staff may have to pay £100 per employee per year, a cafe franchise employing 150 people at several locations may only be quoted £90 per employee per year, even if the staff do the same work and complete the same safety training. The overall cost, however, will obviously be higher for the latter.
Industry risk factors
Some industries are more risky than others. Of the 135 workplace fatalities that happened in the UK in 2022 and 2023, one third occurred in the construction industry. Other dangerous industries include agriculture, forestry, fishing, and manufacturing.
Although workplace-related accidents may be far more serious in industries involving heavy machinery, don’t forget some jobs might not sound as dangerous, but will still hold some risk and require safety training. These jobs include:
- Cleaning and housekeeping
- Catering
- Retail jobs like shelf-stacking
- Working on an assembly line
- Driving, including lorry drivers and delivery drivers
- Painting and decorating
- Operating sewing machines
Although the risk of death in these industries is lower, there’s still a risk of injury, including RSIs and back problems, which will push up the insurance costs for workers in these fields.
Claims history
As with other types of business insurance, if you’ve previously claimed on your employers’ liability, you’ll probably face higher premiums going forward. This is because insurers will consider your business a greater risk.
How can I lower the cost of liability insurance?
Because it’s a form of compulsory insurance, you won’t be able to save money simply by skipping employers’ liability. The fine for not having it is too high, and making sure your employees are protected is an essential part of doing business.
This leaves many business owners looking for a way to lower their employers’ liability premiums, so they can get a comprehensive level of cover for a good price.
Training and assessing employees
If your employees are up to date with the safety training available for your industry (including the basics like personal protective equipment and manual handling), you may be able to get a better deal for your insurance. Look at the training recommended by the Health and Safety Executive. You may also be able to find enhanced safety courses specific to your industry.
Workplace safety measures
Installing the latest safety equipment and ensuring current equipment is maintained is another way to make your workplace safer. This can reduce your insurance premiums and avoid any potential fines for out-of-date equipment (as well as help avoid legal action in the first place).
Experienced staff
Depending on your industry, it can be seen as less risky to hire more experienced staff, rather than people who are new to the industry. This isn’t necessarily a reason to avoid newly qualified employees completely, but the level of experience in your team is something insurers take into account.
No-claims bonus
The longer you go without claiming on your employers’ liability insurance, the better the chance you’ll be able to get a discount when you renew your policy or shop around for a new quote.
Do I legally need employers’ liability insurance? Exemptions to know
Although employers’ liability is a legal requirement for most businesses with full or part-time employees, volunteers, or subcontractors, there are some exceptions. The relevant legislation here is the Employers’ Liability Act 1969, section 2.
In terms of the act, family businesses do not need employers’ liability to employ close family members. Some public organisations are also exempt because they have other procedures in place to cover workplace-related accidents. These organisations include:
- Local authorities
- Government departments and agencies
- Police
- Healthcare, such as NHS trusts
- Nationalised industries
The final exception is for companies that employ people who are not based in the UK. In this situation, though, you will need to take out liability cover if these employees or subcontractors come to the UK for 14 consecutive days to work.
Naturally, sole traders who don’t employ anyone at their business can also make a saving on their insurance budget. Although they may need other types of insurance, like professional indemnity or business vehicle insurance, they’re not an employer, so they don’t need employers’ liability cover.
Does employers’ liability cover members of the public?
Employers’ liability is an essential part of keeping the people who work for your company safe, but it only covers employees, volunteers, and subcontractors — not members of the public or customers who enter your premises.
To insure against legal action from customers and passers-by in case of accident, injury, illness, accidental death, or property damage, you need public liability insurance. This type of insurance covers the place where you do business, and damage or injury as a result of your work (for example, if someone’s car is scratched by your equipment at the site where you’re working).
Unlike employers’ liability, public liability insurance is not a legal requirement. However, since the cost of settling a personal injury claim can be so high, public liability is an important part of protecting your business. In practical terms, many companies will also refuse to work with a business that can’t prove they have adequate employers’ and public liability insurance, so it’s a very good idea to have a high level of coverage in this area too.
The cost of employers’ liability insurance: A summary
Still wondering how much does employers’ liability insurance cost? Compulsory employers’ liability insurance usually costs at least £60 per employee per year, but the bill can vary dramatically depending on your industry, the number of employees you have, and your past insurance claims.
You’ll have to take out a policy with at least £5 million to cover the potential cost of compensation to fulfil your legal obligations. But you might be able to lower your premiums by refreshing your employees’ health and safety training, and maintaining or upgrading equipment to make your company a safer place to work.
The fines for not having and having proof of the correct level of employers’ liability can spiral quickly, so make sure you’re fully covered.
And if your question is how do I get employer liability insurance? The answer to that is simple. Contact an experienced broker like Howden to get your business insurance in order today.
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