Employers' insurance 'should be dropped' for freelancers

The Government is considering dropping the requirement that small businesses must have employers' liability compulsory insurance.

Minister for Work, Des Browne, announced a wide-ranging consultation on whether to remove the requirement for some of the UK's smallest businesses to have employers' liability compulsory insurance - and early indications are that the Government is prepared to do this.

The move could affect up to 300,000 limited companies across the country where the owner is the sole employee.

Following its final review into employers' liability compulsory insurance (ELCI), the Department for Work and Pensions undertook to review the ELCI regulations relating to such businesses.

Requirement 'should be dropped'

The results of the first stage of this review are presented in a Partial Regulatory Impact Assessment along with the DWP's initial view that the requirement should be dropped.

Mr Browne said: "We are keen to hear the views of the industry on this issue. There are obvious advantages for the smallest businesses if the requirement for ELCI is removed, the main one being the reduction in cost.

"This will bring incorporated owners or sole employees into line with similar unincorporated businesses, but does risk a reduction in business to insurers in a sector which has experienced difficulties over the last few years."

The consultation on the assessment will take place until June giving everyone a chance to have their say, including industry organisations such as the Association of British Insurers (ABI), the British Insurance Brokers' Association and the Federation of Small

Businesses.

If members of the UKTECH network wish to contribute to the consultation, please post your views here and I will summarise them and submit to the DWP.

Employers' Liability - background

With some exceptions, for example government departments and agencies and local authorities, the Employers' Liability (Compulsory Insurance) Act 1969 requires employers carrying on business in the United Kingdom to insure their liability to their employees for bodily injury or disease sustained in the course of their employment in Great Britain. There is currently a penalty of up to £2,500 for failure to insure on any day.

The legislation provides that an owner/sole employee is not required to purchase ELCI if the business remains unincorporated. However the incorporation of a business creates an employer and a requirement to purchase ELCI.

The Department published its second stage and final report of the review of ELCI on 4 December 2003. In the report the Department undertook to review the ELCI regulations relating to 300,000 of the smallest limited companies where the owner is the sole employee to exempt these from employers' liability. The publication of a Partial Regulatory Impact Assessment (RIA) is a first step in the review process and the production of a Final RIA.