Business Clinic: What employer liability cover do I need?

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s experts can help. Laura Mitchell of insurance broker A-Plan Rural sets out how to get the correct levels of employer’s liability cover in place.

Q: My farm business is diverse, with a flexible workforce which includes full-time employees, family members who are partners in the business, regular casuals and part-timers, as well as agency staff supplied by a third party at very busy times. We try to reduce risks, but some of the reports I’ve read recently have made me focus more on health and safety. As part of this review, I would like some advice on how to make sure we have the correct levels of employers’ liability cover.

A: This is a common question and a very important one to ask, especially as agriculture is one of the most dangerous professions to work in.

Figures from the Health and Safety Executive show that 41 people were killed in agriculture-related activities between April 2020 and March 2021, double the number of deaths in the previous year and five times more than the annual rate across all industries.

Setting the right level of Employers’ Liability (EL) cover is vital.

It is important to start by saying that EL is a legal requirement for any business that is using labour, and that £5m of indemnity cover is the legal minimum.

However, £10m has become the industry standard. In recent years, changes in the Ogden tables, which help calculate the lump sum compensation due in personal injury and fatal accident cases, have seen the size of liability claims increase substantially. As a result, we have recommended that our clients consider taking £15m or £20m of cover.

See also: Business Clinic – does insurance cover costs of fly tipping?

These increases have been driven partly by low interest rates, leading courts to award higher lump sums in a bid to ensure claimants who have been seriously injured have sufficient funds for long-term care.

Always consider the worst-case scenario and, although this sounds morbid, don’t presume that the death of a worker is the limit.

If you have a young workforce undertaking potentially dangerous tasks, then a serious accident in which one or more suffer life-changing injuries could lead to multiple claims to cover care for the rest of their lives.

So, who needs to be covered?

It is not only full-time employees you need to consider. If anyone is working or helping out on your premises under your direction, or using tools and machinery provided by you, then in the eyes of the law they are seen as an employee.

It really doesn’t matter what their tax status is or even whether they are being paid. If they are injured while working on your farm, then you are likely to be liable and could face a claim.

This includes full-time employees, seasonal workers and casual labour.

Who does not need to be covered?

Domestic employees such as cleaners and gardeners should also be included, but are often covered by a household policy. Check the policy wording or speak with your broker.

You may not need to provide EL cover for workers who are contractors, agency staff or self-employed, if they have their own insurance in place. But remember to check first.

It is also important to determine whether they have the appropriate qualifications for the job they are undertaking.

If you utilise self-employed workers or small contractors with no insurance in place, you may still be liable.

What about friends and family?

This has become a bigger issue during the pandemic, when some farms have had to pivot in this direction to stay in business.

Perhaps family or friends are helping out with an Airbnb or pop-up campsite, or assisting with seasonal picking.

Many farmers are under the impression they do not need to include them on their EL insurance policy, but this is a mistake.

Even if they are unpaid, in the eyes of the law they are “working” if they complete tasks under your guidance and using your equipment.

The same is true for occasional or “odd job” workers who complete small projects on site.

You must also ensure everyone is covered effectively and efficiently.

Premiums are usually based on the type of jobs being carried out and the size of the wage roll, including any benefits employees receive as part of their employment.

We understand that some employees fulfil multiple duties, such as office work and manual labour.  As such, you should provide your broker with a breakdown of wages apportioned according to job type.

With due consideration to each element above, you will be able to insure your workforce comprehensively and competitively.

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