Under the Employers Liability (Compulsory Insurance) Act 1969 and it’s subsequent amendments it is a legal requirement for all employers to hold an approved employers liability insurance policy but there are exceptions to this requirement that applies to the employment of family members.
The exception does not apply in all circumstances and it is important that the situation is understood correctly by employers operating family businesses.
What is the exemption for family members under employers liability insurance?
The act states;
This Act shall not require an employer to insure—
(a)in respect of an employee of whom the employer is the husband, wife, father, mother, grandfather, grandmother, step-father, step-mother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister;
This clearly defines close family members do not create a requirement to hold employers liability insurance but this does require some additional clarification.
Employers Liability for Family Members in Limited Companies
This exception does not apply to incorporated bodies and limited companies. Irrespective of whether you consider it a “family business” and all employees are family members as defined in the act you require the insurance.
Employers Liability for Non-Family Members
If you have employers liability insurance in place for non-family members then any family members are included as employees and the cover applies in respect of these people. You cannot exclude family members under an employers liability insurance policy and if you are required to declare the number of staff or wages information to your insurer you must include these employees.
the exemption under the act merely removes the legal requirement for EL cover for family members. It does not preclude you from arranging the insurance to protect you from any claims from family members in respect of your legal liability for death, personal injury or diseased arising during the course of their employment. In fact, it is an excellent idea to arrange the insurance as it can avoid any potentially disastrous financial or family problems in the event that an employee suffers injury that might otherwise be the subject of a successful claim with another employer.