Reply to: Do clerical workers count when getting a business insurance?

[Qdos Contractor]

When applying for insurance with Qdos the number of people for cover should represent the total number of employees, this would include working directors, employees and labour only subcontractors.

In the example provided with a company employing one director and their spouse (performing administrative tasks), this would still be the case. This would increase the premium and the driver for this is largely the Employers Liability risk as an employer’s duty of care to their employees, regarding providing a safe working environment etc., is not excused by virtue of the employee being the directors spouse.

Whether the premium would alter following an increase to the number of employees will depend on the provider and the policy being purchased. The number of employees is a longstanding exposure measure in Employers & Public Liability Insurance i.e. the premium increasing with an increase in the number of employees declared, however our Professional Indemnity insurance has turnover as an exposure measure and as such would not increase in price from 1 to 2 employees declared (assuming turnover remains constant).

There is however a distinction to be made between what information needs to be disclosed/what selections are made when applying for a policy (i.e. the applicants duty to make a ‘fair presentation of the risk’ as per the Insurance Act) and the legal requirement to carry Employers Liability Insurance. Essentially the requirement applies to all businesses with employees unless they are ‘exempt’ from holding the cover, these exemptions are set out in the act and should be reviewed before making a policy decision, but the most pertinent to this discussion are:

• The family business exemption – businesses would not be required to carry Employers Liability insurance if all employees are closely related. This is sometimes quoted as a reason a contractor employing only their spouse would not look to carry Employers Liability insurance, however this exemption does not apply to businesses incorporated as limited companies.

• Companies employing only their owner where that employee also owns 50% or more of the share capital. This means that for businesses who have 2 employees (the director and a spouse/admin employee for example), they would be required to carry Employers Liability Insurance. If there were 2 shareholders with 50% shareholding each and only one was employed by the business i.e. not a pure shareholder, the exemption would apply.

Apologies the above position was not accurately conveyed via our online chat system, we would be more than happy to discuss further if required.

[SueEllen]

Yes, they were QDOS - live chat support. Actually, first they said 1 or 2 employees shouldn't affect the price, but when I tried and the price almost doubled, they said... "ah, in that case, I'll put two to make sure the insurance is valid". I could have asked my daughter and get a similar answer... :S. hence that I am trying to clarify with other fellow contractors that might know due to different reasons.

An employee can sue you further down the line if there is a health or other problem that is covered by the insurance so the risk to the insurer increases. Even if you are married to that employee there is no guarantee that you will still be married in 10+ years time when the problem appears.

Never thought about what implies that she is or she is not a director in our current circumstances. I'll need to research what that means for the short and long term...

Google is your friend. The main risk is on her side e.g. you screw up with HMRC and she is also legally liable as a director. However as you are married you should trust each other not to do so.

[mickael28]

Any of them contractor specialists?

Yes, they were QDOS - live chat support. Actually, first they said 1 or 2 employees shouldn't affect the price, but when I tried and the price almost doubled, they said... "ah, in that case, I'll put two to make sure the insurance is valid". I could have asked my daughter and get a similar answer... :S. hence that I am trying to clarify with other fellow contractors that might know due to different reasons.

Make your wife a director and then you won't need to worry about insurance and give excuses if HMRC ever come knocking on why she is paid so much for doing SFA. She has half the shares anyway and you are married so you can't exactly run away with the company money. Also just because she is a director doesn't mean you give her access to the company bank account.

The form takes seconds to complete on Company's House.

Never thought about what implies that she is or she is not a director in our current circumstances. I'll need to research what that means for the short and long term...

[SueEllen]

I talked to them earlier on, and checked a few other sites, and although not much difference, for PL/EL there was a change from £100 to ~£200 depending on whether one had to insure 1 or 2 people.

My wife is a 50% shareholder as well, hence that I don't know now if we won't require these PL/EL by law? The insurers didn't mention anything about exceptions, they just said... "just to be sure that your policy is valid, I would include 2 people", which coming from them directly is a little bit shocking...

Make your wife a director and then you won't need to worry about insurance and give excuses if HMRC ever come knocking on why she is paid so much for doing SFA. She has half the shares anyway and you are married so you can't exactly run away with the company money. Also just because she is a director doesn't mean you give her access to the company bank account.

The form takes seconds to complete on Company's House.

[northernladuk]

I talked to them earlier on, and checked a few other sites, and although not much difference, for PL/EL there was a change from £100 to ~£200 depending on whether one had to insure 1 or 2 people.

My wife is a 50% shareholder as well, hence that I don't know now if we won't require these PL/EL by law? The insurers didn't mention anything about exceptions, they just said... "just to be sure that your policy is valid, I would include 2 people", which coming from them directly is a little bit shocking...

Any of them contractor specialists?

[mickael28]

By owner they can only mean shareholder in context. Probably, but not necessarily, a director as well.

Re your wife doing admin, unless a 50% shareholder she would be an employee for these purposes. The starting point is anyone paid under a contract of service, or anyone classed as a worker under EU directives, would be an employee, unless otherwise exempted (eg as 50% shareholder). I'm not aware of any other exemptions other than 50% shareholding one.

However talk to your insurers it may not actually impact the policy cost.

I talked to them earlier on, and checked a few other sites, and although not much difference, for PL/EL there was a change from £100 to ~£200 depending on whether one had to insure 1 or 2 people.

My wife is a 50% shareholder as well, hence that I don't know now if we won't require these PL/EL by law? The insurers didn't mention anything about exceptions, they just said... "just to be sure that your policy is valid, I would include 2 people", which coming from them directly is a little bit shocking...

[Jessica@WhiteFieldTax]

But when they mention "employing only their owner", are they referring to the director?, ie, how would be classified a wife doing the admin work for the company if she's not an employee, or is she?

By owner they can only mean shareholder in context. Probably, but not necessarily, a director as well.

Re your wife doing admin, unless a 50% shareholder she would be an employee for these purposes. The starting point is anyone paid under a contract of service, or anyone classed as a worker under EU directives, would be an employee, unless otherwise exempted (eg as 50% shareholder). I'm not aware of any other exemptions other than 50% shareholding one.

However talk to your insurers it may not actually impact the policy cost.

[mickael28]

companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company

But when they mention "employing only their owner", are they referring to the director?, ie, how would be classified a wife doing the admin work for the company if she's not an employee, or is she?

[Jessica@WhiteFieldTax]

Hi,

Two doubts:

Limited Companies
Another exemption applies here:
companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company
This would exempt a situation where
(i) a controlling director (50% shares or more of shares) is the only employee; and
(ii) where two people work for the company and have 50% of the shares each.

I noticed in another link that they mention one would need 51% of the shares, not 50%. Do you know why that might be? or which figure is the correct one?
Public liability and employers liability help and questions - insuredrisks.co.uk

If you are a limited company consisting only of yourself, and manual and clerical staff, where you own more than 51% of the business, then employers liability insurance is not required.
If you are a limited company consisting only of yourself, and manual and clerical staff, but own less than 51% of the business then employers liability insurance is required.
If you are a limited company with more than one person then employers liability insurance is always required.

Regarding this, do you know what is the salary figure that makes a difference regarding Pensions auto enrolment, or where to find more info?

Re the EL I'm relying on:

http://www.hse.gov.uk/pubns/hse40.pdf

Which says

companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company

So I would go with 50% not 51%

For pensions auto enrolment look at The Pension Regulators website, or refer back to your accountant (why buy a dog and bark yourself?)
The Pensions Regulator | workplace pensions law | auto enrolment | The Pensions Regulator

Sepecifically http://www.thepensionsregulator.gov....-to-enrol.aspx for thresholds

[northernladuk]

Thanks for the link, I didn't know what to search for.

I asked SJD two or even three times at the time to try and get further details to understand that, and they mainly kept coming back saying that I needed not to worry, although not much explanations about why not. I've not checked QDoS Accountancy services to see how they compare to SJD (which were kind of expensive last time I checked)

I meant speak to the QDOS insurances people. They specialise in contractors insurance so will know exactly what you will need in your situation.

[Scruff]

If she isn't a "fee earner" and you are a "typical IT contractor" with a PSC, then I would be very careful about making her an employee, and paying her a salary.

Under those cirumstances, the clerical/admin work in an IT Contractor's Limited company, typically takes 20-30 minutes per month. Her salary should be commensurate with the effort.

If your Accountant has suggested otherwise, or you have been taking counsel from "Pub Accountants/Fellow Contractors" , then you need to be concerned.

[mickael28]

Well your accountant should be helping you with this but failing that there is google.

If you are struggling with all this I'd recommend you give QDOS a ring who specialise in this type of thing. They will walk you thought it all.

Thanks for the link, I didn't know what to search for.

I asked SJD two or even three times at the time to try and get further details to understand that, and they mainly kept coming back saying that I needed not to worry, although not much explanations about why not. I've not checked QDoS Accountancy services to see how they compare to SJD (which were kind of expensive last time I checked)

[northernladuk]

Regarding this, do you know what is the salary figure that makes a difference regarding Pensions auto enrolment, or where to find more info?

Well your accountant should be helping you with this but failing that there is google.

If you are struggling with all this I'd recommend you give QDOS a ring who specialise in this type of thing. They will walk you thought it all.

[mickael28]

Hi,

Two doubts:

@OP
PL and PI are discretionary insurances. EL is compulsory. I looked into the position of family members and EL, and my conclusions are here:
.

Limited Companies
Another exemption applies here:
companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company
This would exempt a situation where
(i) a controlling director (50% shares or more of shares) is the only employee; and
(ii) where two people work for the company and have 50% of the shares each.

I noticed in another link that they mention one would need 51% of the shares, not 50%. Do you know why that might be? or which figure is the correct one?
Public liability and employers liability help and questions - insuredrisks.co.uk

If you are a limited company consisting only of yourself, and manual and clerical staff, where you own more than 51% of the business, then employers liability insurance is not required.
If you are a limited company consisting only of yourself, and manual and clerical staff, but own less than 51% of the business then employers liability insurance is required.
If you are a limited company with more than one person then employers liability insurance is always required.

@OP
Also there is no automatic family exception for Pensions auto enrolment AFAIR. Issue will be around salary and whether she is an officer or not.

Regarding this, do you know what is the salary figure that makes a difference regarding Pensions auto enrolment, or where to find more info?

[Jessica@WhiteFieldTax]

@OP

PL and PI are discretionary insurances. EL is compulsory. I looked into the position of family members and EL, and my conclusions are here:

https://www.whitefieldtax.co.uk/help...ity-insurance/

Also there is no automatic family exception for Pensions auto enrolment AFAIR. Issue will be around salary and whether she is an officer or not.