Does Employers’ Liability Insurance Cover Contractors?

05 February 2021

Contractors can be employed in different ways. You'll need to establish the employment status of the contractor to determine whether or not they will be covered by employers’ liability insurance.

Contractors who are self-employed are unlikely to be covered under their client's employers’ liability insurance. However, contractors who are recognised as employees of an organisation will be covered by that organisation’s employers’ liability insurance.

What is employers’ liability insurance?

Employers have a duty of care to their employees, meaning that employees should be protected from harm in the workplace. This involves protecting employees from substances which can cause diseases and from hazards which could injure them while at work. If an employer breaches this duty of care and this results in an employee suffering harm, then the affected employee could make a work accident claim against their employer for compensation. This type of claim is known as an employers’ liability claim.

Under the Employers’ Liability (Compulsory Insurance) Act, all employers are legally required to have employers’ liability insurance. This insurance covers the cost of claims brought by employees who have suffered illness or injury as a result of the employer breaching their duty of care. Businesses employing one or more people are legally obliged to have employers’ liability insurance in place.

How should employers fulfil their duty of care?

Employers are obliged by law to provide a safe working environment for their employees, which includes safe premises, a safe system of work, adequate plant and equipment and competent colleagues. Most employers will have measures in place to ensure that they are meeting this requirement.

These measures will usually be tailored to the nature of work being carried out and the working environment in question. For example, all employers should have robust health and safety policies / procedures in place which are specific to their workplace, and these should be enforced. If an employee is found to be negligent or does not adhere to health and safety regulations then the employer is responsible for taking action.

Before being asked to carry out certain duties, employees should be: - provided with thorough training - supplied with protective clothing and equipment, if needed

The employee should then be appropriately supervised. Employers should also carry out risk assessments to ensure machinery, equipment and buildings are safe. If issues are found these will need to be addressed, with additional safety measures implemented in the meantime.

What’s the definition of an employee?

Employers are only required by law to have employers’ liability insurance for people who they employ under a contract of service or an apprenticeship. Not all contractors fall into this category, so to understand whether a contractor is covered under employers’ liability insurance, it’s necessary to establish whether or not they are classed as an employee.

Employers’ liability insurance is likely to cover the worker when the employer:

  • Deducts National Insurance and income tax from their pay
  • Has the right to control where and when they work and how they do it
  • Supplies their work materials and equipment
  • Has a right to any profit the worker makes (even if this is then shared with them through commission, shares in the company or performance pay)
  • Only allows the person in question to carry out the work, meaning they cannot send a substitute in their place
  • Treats the person in the same way as their other employees.

Employers’ liability insurance is unlikely to cover the worker when they:

  • Do not work exclusively for the employer
  • Supply their own equipment and materials
  • Are in business for their own personal benefit
  • Can employ a substitute to do the work for them if they are unable to do it themselves
  • Are paid by the employer without National Insurance and income tax being deducted

However, it’s important to note that even if someone is self-employed for tax purposes, employers’ liability insurance might still be needed to cover them for other reasons.

Will employers’ liability insurance cover me?

If a contractor is recognised by HMRC or the courts as being an employee, then the employer has the same duty of care to them as to their other employees. Their employers’ liability insurance will also cover that individual.

If a contractor is recognised as a self-employed independent contractor, then they will not be covered under their client’s employers’ liability insurance.

Some clients of independent contractors will require the contractor to hold their own employers’ liability insurance. This can be the case even if the self-employed contractor does not have any employees of their own.

If you are working as an independent contractor it’s important to check the contract that you have in place with your client(s) to establish whether you are required to hold employers’ liability insurance yourself.

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