The long-awaited decision on employers’ liability insurance for sole traders was announced yesterday.
The Employers’ Liability (Compulsory Insurance) Act 1969 requires employers to insure against claims by employees for any personal injury sustained at work. There is currently a penalty of up to £2,500 for failure to insure on any day.
Key stakeholders voted by 80% to drop the requirements for sole-trader companies to purchase the insurance following wide-ranging consultations.
The exemption will only stand if the business remains unincorporated. An incorporation creates a separate legal person, the company, who acts as the employer and triggers the obligation to have the insurance.
Jane Kennedy Minister for Work said the changes could benefit many limited companies where the owner is the sole employee. Best estimates show there are around 300,000 such companies across the country that will each save around £250 a year according to the Association of British Insurers.
“Removing this requirement will help many small businesses whose owners have told us they cannot afford to buy this compulsory insurance.
“We have given everyone the chance to have their say in the matter, and listened to their views. This change will bring small companies who have a single employee who owns the company into line with similar unincorporated businesses.”
Amending Regulations will be introduced later this year and will come into force early in 2005.
A spokesperson from the Federation of Small Businesses (FSB) told HRZone:
“FSB have lobbied for this change over the last couple of years. Against the backdrop of escalating employers’ liability insurance premiums this is an important, tangible step that the government has introduced for the benefit of small businesses.”