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Starting your own business is tempting. However, there are many things that you have to keep in mind when you do.

For example, as soon as you become an employer, you are legally required to get Employers’ Liability insurance.

Today we’ll take a look at what this type of insurance is, why do you need to have one and how much you might have to pay in fines if you fail to comply.

Why is it necessary?

Employers’ Liability insurance will help you cover the compensation amount and legal costs in case your employee gets hurt or ill at the workplace.

For example, imagine that somebody carelessly left some boxes unattended in the office. Your employee tripped over them and broke his hand. Later, he claimed a compensation for a work-related injury. You might end up paying compensation for the injury, legal costs and medical expenses!

But if you have Employers’ liability insurance these expenses will be a headache for your insurer, not you. Sounds good?

How many employees do I have to have?

You have to acquire Employers’ Liability insurance as soon as you get your first employee. That means that one employee is already enough for you to be legally required to buy Employers’ Liability insurance.

You’ll also need to get this insurance if you employ people part-time, temporarily or have unpaid workers (e.g. interns).

Are there situations when I wouldn’t need one?

Yes, you do not need this type of insurance if

• you’re a sole director of the company, you own at least 50% of the shares and have no employees
• you are employing a close family member (doesn’t apply if you run a limited company)

However, in these cases it is important to double check with your accountant.

How big are the fines?

• You can be fined £2,500 every day you are not properly insured.
• You can also be fined £1,000 if you do not display your EL certificate or refuse to make it available to inspectors when they ask.

By the way, you also have to introduce the EL certificate to your employees. It has to be displayed in an easily accessible place in the office or online.

Which insurance companies are authorized?

Check to see whether your preferred insurer is authorised by looking at the Financial Conduct Authority register or contacting the Financial Conduct Authority.

What’s the minimum Employers’ Liability coverage?

• Your policy must cover you for at least £5 million (minimal amount).
• Most insurers offer £10 million cover

How much is it?

The price you pay will depend on a number of factors such as the type of your business, the field you operate in, how many employees you have, etc.