Employers’ liability insurance: what’s right for family businesses?

Safety and insurance

2 February 2018

Fortune favours the brave, but bravery and recklessness are two different things. When you’re making bold decisions to grow your family business, you need to have a fail-safe in place.

And if you’re employing staff for the first time, regardless of whether they’re family or not, it’s worth exploring your options when it comes to employers’ liability insurance.

Let us help explain why.

The law

According to UK law, every business employing staff to work in the UK needs to have employers’ liability insurance. It must cover you for at least £5 million (AXA's policy covers £10 million as standard), and come from an authorised insurer. If you’re concerned about your provider, you can check their credentials on the Financial Conduct Authority (FCA) register.

This law covers all employees with an expressed or implied contract, including oral contracts. So even if the paperwork’s not there, you still need to be insured if people are working for you. There is, however, one clear exception: if the employee is part of your immediate family. Whether it’s your partner by marriage or civil partnership, a member of your immediate family ranging from grandparents to grandchildren (including step-children and half siblings), you are exempt. This exemption does not apply to incorporated, limited companies.

Protecting your family

Families are the lifeblood of many UK businesses, providing as much as £7.2 billion in money and loans and priceless levels of personal and professional support to loved ones starting or growing their company. While you may not be legally required to have employers’ liability insurance when you employ them, we know how important family can be, and you can help protect your loved ones by ensuring they’re covered. When you have insurance, if anything happens while a family member is on the job they could receive compensation for their injuries.

Protecting your business

If your business is growing, even if it’s just within the family, it is wise to consider protecting it with insurance. Having insurance in place not only offers security to the family members or other staff you employ, it can protect you against compensation and legal costs you may be liable for. What’s more, if you don't have a suitable policy you’ll be breaking the law.

If you do hire employees without the right policy in place, you’re putting your business in real financial risk. For every day you don't have insurance, you can be fined up to £2,500. Simply failing to have your insurance certificate accessible to staff or being unable to show it to an inspector when asked can result in a £1,000 fine. By removing this risk, you’re protecting your legacy as well as your team and your family.