You are only required by law to have employers’ liability insurance for people who you employ under a contract of service or apprenticeship.
Whether or not you need employers’ liability insurance for someone who works for you depends on the terms of your contract with them. This contract can be spoken, written or implied. It does not matter whether you usually call someone an employee or self-employed or what their tax status is. Whether you choose to call your contract a contract of employment or a contract for services is largely irrelevant. What matters is the real nature of your relationship with the people who work for you and the nature and degree of control that you have over the work they do.
The following may help give you some indication of whether or not a person is an employee under the Employers’ Liability (Compulsory Insurance) Act. However, it is for you to satisfy yourself of the status of the persons working for you and if you have any doubts, you should seek legal advice.
You may need employers’ liability insurance 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 employers’ liability insurance for people who work for you where:
What happens if I do not have employers’ liability insurance?
- 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 can employ a substitute when they are unable to do the work themselves;
The Health and Safety Executive (HSE) enforces the law on employers’ liability insurance and HSE inspectors can check that you have employers’ liability insurance with an approved insurer for at least £5 million. They may ask to see your certificate of insurance and other insurance details.
You can be fined up to £2500 for any day which you are without suitable insurance.
If you do not display the certificate of insurance or refuse to make it available to HSE inspectors when they ask, you can be fined up to £1000.