February 2006

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Nearly three-quarters of UK sole-traders admit to confusion over employers' liability insurance law

NEARLY THREE-QUARTERS OF UK SOLE-TRADERS ADMIT TO CONFUSION OVER EMPLOYERS’ LIABILITY INSURANCE LAW 1

- It is estimated that over 50,000 sole-traders are employing seasonal and part-time staff without adequate Employers’ Liability (EL) cover and could be fined2
- UK Sole Traders are collectively putting themselves at risk of fines totalling £125 million per day3

One year on from the change in Employers’ Liability legislation, 73%1 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. MORE TH>N Business 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 day3.

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.

Rachel Cotton, MORE TH>N Business Manager, comments: “It is clear from our research that businesses are not deliberately choosing to flout the law or forfeit cover, but that there is a general lack of understanding around the Employers’ Liability legislation.”

Whilst we don’t wish to worry sole traders unnecessarily, we are urging them to re-evaluate their situation and insurance requirements on the anniversary of the change in legislation. This is not only to protect their own livelihood but also safeguard their employees. In all cases, if in doubt, they should seek legal guidance or contact their insurance company.”

Chris Foss, a sole trader from Shoreham, West Sussex, has been running his own business, Chris Foss Designs, which designs and manufacturers radio controlled aircraft kits for over 30 years. Chris said: “I have been running my own business as a sole trader now since 1976 and I was completely unaware that should I ever need to take on part time help I would need Employers’ Liability Insurance or be liable for these fines.”

To help businesses determine whether they need EL cover, MORE TH>N Business’ specialist underwriters have provided below 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.

MORE TH>N Business provides Employers’ Liability cover as an optional part of its small business package policy. It provides protection to the employer in case he or she is sued for damages by an employee (including certain self employed people), who is killed, injured or contracts a work related disease or condition as a result of carrying out work for the employer in the course of his or her business. The policy also pays all legal costs associated with a claim to the maximum amount of £10m.

For further information on small business insurance from MORE TH>N call 0800 072 0077 or log onto www.morethanbusiness.com.

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Notes To Editor:
1. Based on a study of 300 sole traders.
2. Based on the fact that there are approximately 300,000 sole traders in the UK.
3. Based on 50,000 sole traders receiving a fine of £2,500.

About the research
The survey of 300 sole-traders was carried out online between January and February 2006 by Critical Luton.

About MORE TH>N Business
MORE TH>N Business, part of Royal & SunAlliance’s direct financial services arm MORE TH>N, offers van, shop, office, business car, hotels, property, club and contractor insurance direct to small businesses. MORE TH>N also offers motor, home, pet, travel, life and health insurance, as well as a credit card.

For more information, visit www.morethanbusiness.co.uk or call 0800 294 1818.

For media enquiries, please contact:
Alison McCulloch
MORE TH>N Business external communications
Tel: 020 7337 5619
Email: Alison.mcculloch@uk.royalsun.com

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