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Friday, 17 September 2021
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Does a charity need employers’ liability insurance?

A charity does need employers’ liability insurance if it hires staff or uses volunteers. Just like non-charitable businesses, according to insurance experts, NimbleFins charity employers’ liability insurance is required by law—the same rules apply for corporate businesses and non-profits. 

There are some exceptions to when a charity does not need to protect its staff and volunteers, but in most circumstances, they must safeguard their workers. Failing to do so will incur a fine of up to £2,500 for every day the charity is without insurance. Even failing to display its certificate for its workers to read can incur a £1,000 fine from the Health and Safety Executive. 

Charities must have at least £5,000,000 employers’ liability insurance cover, according to the Government. 

The Association of British Insurers stands firm on its advice, saying volunteers should be covered. The same goes for paid and unpaid staff. Charities are obliged by law to hold employers’ liability insurance.

For the avoidance of doubt, employers’ liability insurance is definitely needed if:

  • The charity controls the hours and location someone works.
  • The charity deducts national insurance and income tax from money paid to the worker.
  • The charity supplies the majority of equipment and materials to do the job. 
  • The charity treats the worker the same as other employees – with the same working conditions for the same work. 
  • The charity has a right to profit made.
  • The charity bans work being subcontracted out.

In general, UK workers may not fall under the legal requirement for employers’ liability insurance if: 

  • The worker supplies the majority of their own equipment and materials.
  • The worker operates as a business for their personal benefit. 
  • The worker does not have national insurance and income tax deducted by the charity. However, if a worker is classed as ‘self-employed’ for tax purposes but is classed as an employee for other reasons, the charity still needs employers’ liability insurance. 
  • The worker does not work exclusively for the charity and can subcontract work out.
  • The worker is a close family member.
  • The worker is based abroad and does not spend 14 continuous days or more in Great Britain (or seven continuous days on an offshore location).

What does employers’ liability cover for a charity? 

Employers’ liability insurance for charities covers compensation and legal costs if a member of staff is injured or dies as a result of working for the organisation. It is a legal requirement in almost all cases for staff to be covered by employers’ liability insurance as it means a charity or business will always be able to cover the cost of compensation should something happen to their worker. 

This does not mean a charity can forego its health and safety responsibilities. Insurers can sue their policyholders for compensation if they are found to be negligent.  

Does charity insurance cover employer liability?

There are a range of charity insurance packages on the market, and their coverages also differ. Charity insurance has been designed to offer protection against issues that only a charity would face, such as offering trustee liability to protect those running the organisation. It can also provide protection against certain losses which would otherwise see the charity face financial difficulty. 

Some charity insurance does include employer liability. Ansvar, for example, offers public and product liability as standard, with an option to add employers’ liability, trustee and directors indemnity, plus a range of other policies which would also be popular for companies looking for business insurance.

Meanwhile, RSA specifically states it will cover volunteers to the same level as paid employees in its charity insurance.

It is best to check with the insurance provider that employers’ liability is included in the charity insurance package.

Public and employers’ liability insurance for charities

Public and employers’ liability insurance is essential for most charities. With fundraising being the organisation’s goal, it will no doubt run events or carry out public speaking events to drum up support. 

Insurance, therefore, provides a safety net to make sure the charity can continue to help others without worrying about the financial risk if something goes wrong. 

Public liability insurance is one of the most popular insurance products for businesses, and it is just as critical for charities. If a member of the public is hurt or has property damaged and the charity is to blame, the victim is within their rights to claim compensation.

Imagine a hospice is running a sports event at its site, and a member of the public falls and breaks their ankle, leaving them unable to work for eight weeks. The victim could sue for damages, and without insurance, this could cost the charity all the profits made at the event and more. Public liability insurance is therefore usually a standard component of charity insurance but is also easily purchased separately. 

Employers’ liability insurance is not only vital for charities hiring staff, it is legally required. If someone is injured while at work, they can sue for damages, and this insurance makes sure a charity or any organisation has the financial means to cover their compensation. The legal rules for protecting volunteers are vague, but a charity should see it has a duty of care for the people working for them, whether they are paid for or not. If not a legal duty to insure volunteers, a charity may see it as a moral obligation to protect them.

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