Guide to Freelancing - PCG

EMPLOYERS‟ LIABILITY INSURANCE
All employers (unless they are exempt) are legally obliged to have at least £5 million of Employers‟
Liability insurance to protect them against claims from employees for accidents or sickness caused
through work. Some insurers include Employers‟ Liability along with Professional Indemnity and
Public Liability insurance as a single package.
Situations where Employers Liability is compulsory for freelancers
Any freelancer who employs someone must take out this insurance. There are no hard and fast
rules about who counts as an employee for the purposes of Employers‟ Liability insurance.
What matters is the real relationship with the people who work for you and the degree of control
you have over the work they do for you. Even part-time and casual staff may count as your
employees. Remember also that you can have employees irrespective of whether your business is
a limited company or a sole tradership. If in doubt, PCG members can contact the legal helpline
– it‟s open 24 hours, 365 days, free of charge.
Exemption from Employers‟ Liability insurance
Very small businesses that employ only their owner are exempt. If they are a limited company,
and employ only the owner, they are still exempt provided that the owner owns more than 50% of
the issued share capital. Family businesses, employing only closely related family members, are
also exempt unless the business has been incorporated as a limited company.
What happens if you contravene
The law is enforced by the Health and Safety Executive (HSE) who can ask to see your certificate
of insurance at any time. You are required to display your Employers‟ Liability Insurance (ELI)
certificate at your work place, so it is visible to all your employees. You are now also allowed to
display your certificate electronically as long as all employees have reasonable access to it. If you
do not display the certificate of insurance or refuse to show it to HSE inspectors when they ask,
you can be fined £1,000. You can be fined up to £2,500 for any day in which you are without
suitable insurance. For more details on employers‟ liability, visit www.hse.gov.uk
MOTOR INSURANCE
Third party liability insurance is compulsory for all motor vehicles used on the road.
Comprehensive insurance includes third party liability but also provides cover for fire, theft and
accidental damage.
Personal accident cover for certain bodily injuries sustained by the driver is usually offered as an
extra option and will pay out a weekly or lump sum; an important consideration if you work for
yourself. Ensure that business use is specifically covered by your motor insurance policy.
Copyright PCG September 2011 Guide to Freelancing Version 7.0 77