14 October 2004 - Good news for small companies - Kennedy
Companies that employ only their owner will no longer have to buy employers’ liability compulsory insurance, following a wide-ranging consultation on whether to remove the requirement, it was announced today.
Minister for Work Jane Kennedy said the move could benefit hundreds of thousands of limited companies where the owner is the sole employee.
It is estimated there are around 300,000 such companies across the country. The Government recognises that no single initiative will solve overnight the recent difficulties caused by rapid increases in premiums but is committed to supporting a package of measures that, with the support of stakeholders, will have a cumulative positive effect.
Ms Kennedy said: “Removing this requirement will help many small businesses whose owners have told us they cannot afford to buy this compulsory insurance.”
The Association of British Insurers estimates that the average saving for each company might amount to around £250 a year.
“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,” added Ms Kennedy
The consultation sought the views of employers, insurers and their representative bodies and other stakeholders on the proposal, with nearly 80 per cent of respondents agreeing the requirement should be dropped.
Amending Regulations will be introduced later this year and will come into force early in 2005.
Notes for editors
[an error occurred while processing this directive]- The Department for Work and Pensions undertook to review the ELCI regulations for limited companies that employ only their owner through a Partial Regulatory Impact Assessment between March and June this year.
- A summary of responses to the consultation is published today on the DWP website at www.dwp.gov.uk/publications/dwp/2004/ria/elci_sum_resp_final.pdf (236KB)
- With some exceptions, the Employers’ Liability (Compulsory Insurance) Act 1969 requires employers carrying on business in the United Kingdom to insure their liability to their employees for personal injury 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 a separate legal person, the company, who acts as the 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.
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