Employing family members?
Employers’ Liability Insurance is compulsory for all businesses who employ any people (paid or unpaid). But what if your workers are members of your family?
Under the terms of the Employers’ Liability (Compulsory Insurance) Act 1969, employers are exempt if they are:
family businesses, i.e. if all of your employees are closely related to you (as husband, wife, civil partner, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister). However, this exemption does not apply to family businesses which are incorporated as limited companies.
The law makes it very clear who is considered to be a family member, and therefore exempt from employers’ liability.
Family businesses who only employ family members are not required to have employers’ liability insurance. If you employ anyone outside of your immediate family, then those employees will need to be insured. The insurance policy cover will then apply to all employees, including the family members working for you. As well as full time workers, employees may include apprentices, temps, voluntary workers and part time workers. However, even if your family business does not employ anyone outside of your family, if you have incorporated into a limited company then you will need cover regardless.
It’s also important to note that just because you are exempt from the Employers’ Liability (Compulsory Insurance) Act 1969, this doesn’t mean that you can’t purchase it. One claim I dealt with a few years ago involved a family silversmith business where one brother threw an unfinished box to another instead of handing it to him. This resulted in severed wrist tendons and a claim of over £120,000.
Employers’ Liability Insurance protects business owners from the risks commonly associated with employees, such as injury and illness as a result of working practices. Accidents still occur whether the employee is a member of your family or not. The only difference is how the situation is dealt with. As family relationships will obviously be very different from one which you may have with regular employees, there is less of a financial risk that a family member will take you to court demanding compensation from you. Doing so may put a very real strain on your family relationships. However, if they do, then arranging this insurance will be of benefit to you.
Though it isn’t compulsory, this type of insurance is seriously worth considering all the same. Not only could an accident leave you short-staffed and negatively impact the finances of your family business, but you may also feel obligated to cover any medical costs as a result of the injury or illness – despite financially struggling to do so.
For those employers who are not exempt from the legal requirement, you can be fined £2,500 for every day that you are not properly insured and £1,000 if you refuse or are unable to display your Employers’ Liability certificate when asked by HSE inspectors.