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Sole trader confusion over employers liability insurance rules

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One year on from the change in Employers’ Liability legislation, 73% of UK sole traders admit to not being aware of the update in the law and its implication to sole traders, reveals research by MORE TH>N Business. The research also shows that 21% do not understand what Employers’ Liability insurance covers.

This confusion is leaving some small businesses vulnerable to crippling fines: many sole traders might not be aware that when employing seasonal, part-time staff or even unpaid volunteers they must take out EL insurance as a legal requirement. The research reveals that on the anniversary of the amendment, it is evident that UK sole-traders are collectively putting themselves at risk of fines to the tune of a staggering £125 million per day.

The research shows that 17% of sole traders in the UK employ seasonal or part-time staff without adequate EL cover, this equates to over 50,000 sole traders. This means that a large amount of sole traders would be breaking the law and leaving their businesses not only open to possible fines of up to £2,500 per day but also liable for compensation and legal fees if an employee is injured or becomes ill at work. Even a claim for relatively minor injuries can cost £5,000, including legal costs.

To help businesses determine whether they need EL cover, here is a quick checklist. Answering ‘yes’ to any of the questions is a good indicator that EL cover is a legal necessity.

• Are you likely to hire staff during peak seasons to ease your workload?

It is a criminal offence not to have EL insurance when taking on temporary staff. Your business would not be covered for any liabilities if, for example, an accident happened and the temporary worker was injured in the process of carrying out work.

• Is any of your work undertaken by self-employed people?

People who you normally think of as self-employed may actually be considered as your employees in the eyes of the law, for example, a handyman. Whether or not you need EL insurance for someone working for you in this capacity depends on the extent of your responsibility for their supervision, and on your terms of contract with them. If in doubt, seek legal advice.

• Do you get help from unpaid volunteers or work-experience students?

Unpaid ‘helpers’ may in some cases be regarded as your employees, especially where you have direct responsibility for their work and supervision. If you do have such individuals working for you, contact your insurance company to check that you have sufficient cover.

• Do you have a gardener, cleaner or security guard working for you?

Even if they work for several companies you have to take out EL insurance in respect of the work that they carry out for you. However, if you employ a firm of security guards or cleaners, for example, they should be covered by their own employers’ EL cover.

• Do you employ agency staff, e.g. a delivery person or typist?

Whether or not you require EL cover for agency staff will entirely depend on your contract with the agency. Contracts do vary, therefore make sure you check the terms and conditions, or seek legal advice.

• To get a small business insurance quote via our partner, Simply Business, please click here.

Posted February 22, 2006